Rajan says India's current account deficit comfortable

Rajan said an interest rate cut won't by itself lead to higher economic growth

The Reserve Bank of India (RBI) is comfortable with the current account deficit even after it widened in the July-September quarter, Governor Raghuram Rajan said on Thursday.

Still, Rajan, speaking at a news conference after the central bank's board meeting, said risks remain to the current account deficit even though he was not apprehensive about it.

India's current account deficit widened to 2.1 per cent of gross domestic product in the July-September quarter, higher than both the previous quarter and a year earlier, the RBI said on Monday.

Turning to the economy, Rajan said an interest rate cut won't by itself lead to higher economic growth, although he noted it would have an impact.

Rajan also noted the central bank was in discussions with the government about reviewing priority sector lending norms for foreign banks operating in India, the governor said.

Turning to limits on foreign investments in government bonds, Rajan said it would look at raising the limit at an appropriate time, and would look at expanding it steadily.

Additional reporting by Neha Dasgupta