India’s CAD likely to remain within 3% of GDP: In its most recent bulletin, the Reserve Bank of India (RBI) stated that the country’s current account deficit (CAD) may remain within 3% of GDP this fiscal year. The trade imbalance in India increased to $124.5 billion in the first five months of this fiscal year, up from $54 billion the previous year. The Current Account Deficit was 1.2 percent in the previous fiscal year.
India’s CAD likely to remain within 3% of GDP: Key Points
- According to an article published in the Reserve Bank’s bulletin, India’s current account deficit (CAD), a crucial measure of a country’s balance of payments, is anticipated to remain within 3% of GDP in 2022-23, up from 1.25% in the previous fiscal.
- The trade deficit in India increased to USD 124.5 billion in the first five months of 2022-23, up from USD 54 billion in the previous equivalent period. The trade deficit in fiscal 2021-22 was USD 189.5 billion.
- The article named ‘State of the Economy stated that future prices for crude oil contracts in the next months have weakened. International pricing for vegetable oils and fertilizers appears to be more neutral than earlier. It also stated that petroleum product exports increased year on year in August.
- According to the authors of the article, with portfolio flows recovering and foreign direct investment maintaining high, this level of deficit can comfortably be financed.
- India is cementing its position as the world’s leading recipient of remittances, with inflows exceeding USD 90 billion last year and on track to set a new record this year.
- The growing trade imbalance, or the difference between the value of imports and exports, stresses the balance of payments.
What is the Current Account Deficit?
- The current account tracks the inflows and outflows of products, services, and investments into and out of the country. If the value of goods and services imported exceeds the value of those exported, the country experiences a deficit.
- The current account contains net revenue, such as interest and dividends, as well as transfers.
- The trade balance is the difference between products exported and imported. The ‘Current Account Balance’ includes the ‘Trade Balance.’
- The CAD formula is as follows:
- Current Account = Trade gap + Net current transfers + Net income abroad
- Trade gap is exports minus imports
|Current Affairs April 2022|