India's Current Account Deficit Falls Below 1% Of GDP: NITI Aayog

"India will regain its mojo. We will generate current account surplus soon. CAD is less than 1 per cent currently," according to him.

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What Is A Current Account Deficit — And Why A Surplus Matters: A current account deficit means a country is spending more on foreign trade, income and transfers than it earns — essentially importing more (goods, services, investment income) than it exports. A surplus is the reverse: the country earns more from the rest of the world than it spends. Moving from a deficit to a surplus would mean India relies less on foreign capital inflows to balance its books, reducing pressure on the rupee and giving the economy more resilience against external shocks like the tariff wars and trade disruptions Lahiri described.

Global Uncertainty: Tariffs, WTO And AI

Lahiri said uncertainty in the global economy remains elevated amid what he described as the weaponisation of tariffs, the weakening of the multilateral trading system and rapid advances in artificial intelligence.

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"The uncertainty in the global economy is palpable with weaponisation of tariffs, breakdown of the WTO system and AI technology which is disruptive," he said.

He said that heightened uncertainty has made businesses and investors more risk-averse, but the trend is unlikely to be permanent.

"Let uncertainties recede. People have been risk averse, which is natural, but this will go," he said.

Why FDI Remains Critical

Lahiri said attracting foreign direct investment (FDI) remains critical for India's long-term growth strategy, not only as a source of capital but also for integration into global production networks.

"We need FDI not only for money but also for access to global value chain, for proper scale of manufacturing, for technology," he said.

Manufacturing: "The Major Challenge"

He identified manufacturing as the biggest challenge facing the Indian economy, arguing that the sector needs to expand significantly despite recent improvements.

"The major challenge is manufacturing, which has to prosper," Lahiri said, adding that recent GDP data show manufacturing's share in the economy has increased but "we need much more."

India also needs to achieve greater scale in manufacturing to compete internationally, he said.

"For manufacturing we need scale, which we don't have. China has enormous scale," Lahiri said.

Despite the challenges, Lahiri said the Indian economy has continued to perform reasonably well and remains well positioned to benefit once global uncertainties ease.

(With inputs from IANS)