Current account deficit widens to 2.4% of GDP as oil offsets gains in remittances

Current account deficit widens to 2.4% of GDP as oil offsets gains in remittances

News:

India Current Account Deficit widened to 2.4 % of GDP in April-June quarter of 2018.

Important Facts

2.  CAD reached the level of 2.4 % of GDP in Apr-June 2018 highest in four quarters.
3. Current account on the balance of payments measures the inflow and outflow of goods, services, investment incomes and transfer payments.
4. Reasons for rising in CAD.

• Tension in the Gulf Region
• Instability in oil exporting nation.
• Weakening Rupees has made import costly.
• Depleting Forex Reserve and high Import due to high demand may further widen CAD in near future.

5.Trade war between India and China may hamper export growth.

6.Further widening of CAD is worrying. Because it will be managed through FDI, portfolio investment and Foreign Reserves.

7.Bad global financial condition and strong Dollar has hampered Portfolio inflows. ($8.1 Billion net outflow during Apr-June 2018 against $2.3 Billion net Inflow during last quarter of 2018).

8.As per the different reports, in future the India’s CAD may rise to the level of 2.5 % to 2.9 %.

9.According to IMF, due to challenges with capital inflow, India may not be able to finance CAD above 3 %.