![]() Foremost, a large current account deficit for a continued period of time can lead to depreciation of rupee, and the demand for foreign currency (especially dollars) will see a rise. ![]() Let’s look at some of the adverse effects of a large current account deficit to the economy. How would a Large CAD Affect the Economy?Ī current account deficit occurs when the expenditure on imported goods and services exceeds the value of exports. ![]() The central bank projects real GDP growth for 2023-24 at 6.4% with Q1 at 7.8%, Q2 at 6.2%, Q3 at 6.0%, and Q4 at 5.8%. Meanwhile, private sector transfer receipts, which are remittances made by Indian citizens working overseas, stood at USD 30.8 billion.Ī country’s current account deficit is measured as a percentage of GDP. Exports in the services sector witnessed 24.5% growth, while net foreign direct investment declined to USD 2.1 billion. RBI states that the Q3 decline in CAD is mainly due to a reduction in the trade deficit of goods to USD 72.7 billion from USD 78.3 billion in the second quarter. The country’s CAD was 3.7% (USD 30.9 billion) of the GDP in the previous quarter. India’s current account deficit (CAD) declined 2.2% of gross domestic product (GDP) to USD 18.2 billion in the third quarter of the financial year 2022-2023, according to the data released by the Reserve Bank of India (RBI). Latest Current Account Deficit News in India (Updated April 25, 2023)Īpril 25, 2023: India current account deficit declines 2.2% of GDP The following formula is used to calculate the country’s current account deficit.Ĭurrent Account = Trade gap + Net current transfers + Net income abroad. It calculates the value of import and export of goods and services, which takes into account the sum of trade balance, as well as net income, and private current transfer made during a financial quarter, or a financial year. How to Calculate the Value of a Current Account?Ī country’s current account deficit is measured in the U.S. A deficit in a current account may occur if the country is sending more money abroad than it is receiving.Ĭurrent transfers: This includes transfer of money sent and received by entities mainly in the form of remittances. It includes transactions made by individuals, companies, and government bodies with entities outside the country. This means that India’s expenditure on imports was more than its income earned from export of goods and services during the period.įlow of income: A current account also measures the country’s flow of income, which includes profit, interest and dividends. 2023 is estimated to have touched USD 66.14 billion, while imports stood at USD 72.18 billion during the same period. A trade deficit is the largest contributor to the current account deficit.Īccording to the government data, the value of India’s overall exports in Mar. Trade in merchandise goods and services adds up as the major contributor to the nation’s economic growth vis-a-vis flow of money. ![]() Let’s understand the components of a current account, and see how a deficit may occur.Įxports and imports of goods and services: In a foreign trade, exports and imports refer to selling and buying of goods and services to and from India and other nations. dollar and as a percentage of a gross domestic product (GDP). In India, the Reserve Bank of India (RBI) releases the CAD data every financial quarter, which is measured in the U.S. However, the current account may be “surplus” when it generates more funds from exports than it spends on importing goods and services.ĬAD records every transaction including foreign investment on an Indian company, or transfer of money made by an individual back home in India over a period, though these transactions make up only a small percentage as compared to import and export of goods and services.ĬAD is an important tool to measure the health of a country’s economy. Thus a current account deficit may occur when the country’s expenditure in imports is more than its income from exports of goods and services. Similar to a current account opened by a business to keep track of the inflow and outflow of money, in terms of the nation’s economy, it monitors the transaction of funds made from import and export of goods and services to and from India and foreign nations, and is measured in the U.S. A current account deficit (CAD) occurs when the country’s expenditure is more than its income.
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