CAD stands for Current Account Deficit.
It is an economic indicator that measures the net flow of goods, services, and transfers into and out of a country during a specific period.
The current account is one of the components of a country's balance of payments, which records all economic transactions between residents and non-residents.
The CAD is significant because it affects the economy, stock markets, and people's investments.
A lower CAD can boost investor sentiment and make the country's currency more attractive to investors.
A surplus in the current account indicates that money is flowing into the country, which can boost foreign exchange reserves and the value of the local currency.
A higher CAD indicates that a country is importing more goods and services, or paying more in income and transfers to foreigners, than it is earning from exports and receiving as income and transfers from abroad.
A country with rising CAD shows that it has become uncompetitive, and investors may not be willing to invest there.
In India, the Current Account Deficit could be reduced by boosting exports and curbing non-essential imports such as gold, mobiles, and electronics.
India's current account deficit (CAD) in the fourth quarter of fiscal year 2022-23 narrowed to $1.3 billion (0.2% of GDP) compared to $16.8 billion (2% of GDP) in the previous quarter and $13.4 billion (1.6% of GDP) a year earlier.
The decrease in CAD was primarily due to a reduction in the trade deficit to $52.6 billion in Q4:2022-23 from $71.3 billion in Q3:2022-23, along with strong services exports.
Economists expect an improvement in the CAD in FY23-24, with projections of a lower deficit due to softer export and import values, a narrower goods trade deficit, and a robust services trade surplus.
The CAD is expected to be around $40 billion (1.1% of GDP) in FY23-24 and increase modestly to 1.2% of GDP in FY24-25.
However, it is anticipated that the CAD will rise in Q1 FY24 due to a widening merchandise trade deficit and a slight moderation in the services trade surplus.
EXPORT AND IMPORT IN 2022-23 FINANCIAL YEAR
India’s merchandise export in April -May 2022-23was USD 77.08 billion (1.6% of Global Export) with an increase of 22.26% over USD 63.05 billion in April -May 2021-22.
India’s merchandise imports in April -May 2022-23 was USD 120.81 billion with an increase of 42.35% over USD 84.87 billion in April -May 2021-22.
The trade deficit was 43.73 billion USD during April –May 2022-23.
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