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External vulnerabilities to ease a touch in 2023

India’s current account deficit is likely to have widened to 3% of GDP in 2022, the largest in a decade. We expect the deficit to narrow slightly in 2023 as commodity prices ease and domestic demand comes off the boil. While this still leaves the rupee vulnerable, we think the bulk of the depreciation against the US dollar has now passed and the currency will end 2023 stronger than its current level.

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