Higher trade deficit pushes up Q3 CAD to 2% of GDP at $13.5 bn

Higher trade deficit pushes up Q3 CAD to 2% of GDP at $13.5 bn

Context

Rise in Current Account Deficit (CAD)

What has happened?

The current account deficit (CAD) rose to 2% of the GDP or $13.5 billion in the December quarter, up from $8 billion or 1.4% in the year-ago period, on the back of higher trade deficit, according to Reserve Bank of India (RBI) data

Reason behind rise in CAD

The widening of the CAD on a year-on-year basis is primarily due to a higher trade deficit which rose to $44.1 billion in the reporting quarter due to a larger increase in merchandise imports relative to exports

Other observations

• Decrease in net FDI: Net foreign direct investment stood at USD 4.3 billion, almost 55 per cent less than in the year-ago period when it was at USD 9.7 billion