Why does India have current account deficit?
iStock The rupee was last traded at 74.2975 a dollar. India’s current account is likely to turn to a deficit in FY22 with rising domestic demand resulting in higher import growth compared to that of export while the escalated global commodity prices could push the import bill upwards.
What is the current account deficit of India in 2020?
India’s current account balance recorded a surplus of US$ 6.5 billion (0.9 per cent of GDP) in Q1:2021-22 as against a deficit of US$ 8.1 billion (1.0 per cent of GDP) in Q4:2020-21 and a surplus of US$ 19.1 billion (3.7 per cent of GDP) a year ago [i.e. Q1:2020-21].
What is the current deficit of India?
India’s current account balance posted a surplus of $6.5 billion (0.9 per cent of GDP) in Q1FY22 as against a deficit of $8.1 billion (one per cent of GDP) in Q4FY21. The current account surplus was $19.1 billion (3.7 per cent of Gross Domestic Product (GDP) in Q1FY21, according to Reserve Bank of India (RBI).
What does a deficit in the current account mean?
A current account deficit indicates that a country is importing more than it is exporting. Emerging economies often run surpluses, and developed countries tend to run deficits. A current account deficit is not always detrimental to a nation’s economy—external debt may be used to finance lucrative investments.
Is a current account deficit Good or bad?
Although a current account deficit in itself is neither good nor bad, it is likely to be unsustainable and lead to harmful consequences when it is persistently large, fuels consumption rather than investment, occurs alongside excessive domestic credit growth, follows an overvalued exchange rate, or accompanies …
What happens if current account deficit increases?
Since a higher trade deficit will widen the current account deficit, the rupee could be under pressure from domestic factors also, economists have said. A huge current account gap could make the rupee depreciate further in the absence of meaningful intervention from the central bank.
Does India have capital account deficit?
India reported a current account surplus of 0.9% of GDP in the pandemic-hit FY21, as against a deficit of 0.9% in FY20, data released by the RBI showed on Wednesday.
Is India a trade deficit or surplus?
The current account surplus stood at $6.5 billion in April-June quarter, data from the country’s central bank released earlier showed. India’s overall exports (Merchandise and Services combined) in September 2021 are estimated at $54.06 billion, seeing a growth of 21.44% over the same period last year.
What is India’s current external debt?
India’s external debt was US$ 570 billion at the end of March 2021. It recorded an increase of US$ 11.6 billion over its level at end of March 2020.
Why is current account deficit Good?
The current account deficit is an important signal of competitiveness and the level of imports and exports. A large current account deficit usually implies some kind of imbalance in the economy, which needs correcting with a depreciation in the exchange rate and / or improved competitiveness over time.