Q. Which of the following is/are reason/s for high current account deficit?
1.Higher trade deficit
2.Increase in services receipts
3.Rising Oil Prices
How many of the statements given above are correct?
Answer: B
Notes:
Explanation: Reasons behind India’s increased Current Account Deficit (CAD) are:
- Higher trade deficit: Increased imports and decreased exports have contributed significantly to the widening of CAD.
- Services Receipts Decline: Net services receipts decreased, primarily due to reduced exports of computer, travel, and business services.
- Impact of Global Factors: Slowing global growth has implications for India’s export-oriented services and remittances, adding to the challenges in maintaining a lower CAD.
- Rising Oil Prices: Anticipated increase in oil prices is expected to further widen the merchandise trade deficit. Higher oil prices contribute to increased import costs, affecting the overall CAD.
- Foreign Direct Investment (FDI) Decline: Net FDI declined in the financial account, influencing the overall balance.
Source: FORUMIAS
