About Current Account Deficit:
- The current account measures the flow of goods, services and investments into and out of the country.
- There is a deficit in Current Account if the value of the goods and services imported exceeds the value of those exported.
Current Account Deficit = Trade gap + Net current transfers + Net income abroad
Trade Gap= Exports – Imports
Significance of Current account Deficit:
- Current account balance measures the external strength or weakness of an economy.
- A current account surplus implies the country is a net lender to the rest of the world while a current account deficit indicates it is a net borrower.
- For the Current Account Deficit in India, crude oil and gold imports are the primary reasons behind high CAD.
- The Current Account Deficit could be reduced in India by boosting exports and curbing non-essential imports such as gold, mobiles and electronics.
