Current Account Deficit

#GS-03 Economy

About Current Account Deficit:

The current account deficit is a measurement of a country’s trade where the value of the goods and services it imports exceeds the value of the products it exports.
A current account deficit occurs when the total value of goods and services a country imports exceeds the total value of goods and services it exports.
A current account deficit indicates that a country is importing more than it is exporting.
The current account includes net income, such as interest and dividends, and transfers, such as foreign aid.
The balance of exports and imports of goods is referred to as the trade balance. Trade Balance is a part of ‘Current Account Balance’.
The current account represents a country’s foreign transactions and, like the capital account, is a component of a country’s balance of payments (BOP).

Current Account = Trade gap + Net current transfers + Net income abroad

(Trade gap = Exports – Imports)

State Bank of India has pencilled in a lower current account deficit for India at 3%.

Every ₹1 fall against the dollar leads to an increase in software exports by $250 million.
This, along with an expected $5 billion-forex reserve accrual by way of swap transactions and higher remittances, will cap CAD at 3% of GDP.
Strong remittances and software exports had pushed down CAD by 60 basis points (bps) in the June quarter.
Software exports have been rising with the share of offsite mode of exports by domestic IT services firms soaring to 88.8% in FY22 from 82.8% five years earlier.