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Current account deficit (CAD) UPSC NOTE

 


  • 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.


What does our Current Account Deficit show? - INSIGHTSIAS


  • 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.






India Trade Scenario


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Learnerz IAS | Concept oriented UPSC Classes in Malayalam: Current account deficit (CAD) UPSC NOTE
Current account deficit (CAD) UPSC NOTE
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