Current account deficit halved in January-March quarter, what does it mean for common man, what is the impact on GDP?

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New Delhi. The current account deficit (CAD) has halved in the January-March quarter due to increase in exports and reduction in primary income going to the foreign market. The Reserve Bank released the data and presented a blueprint of the changing picture of business and the strong economic condition of the country.

According to the RBI, in the last quarter of 2021-22 i.e. January-March, the country’s current account deficit has come down to $ 13.4 billion, which was $ 22.2 billion in the quarter earlier (October-December). However, it was $8.1 billion in the January-March 2021 quarter affected by the pandemic. If we look at the ratio of GDP, then the current CAD is 1.5 percent of GDP. This figure was 2.6 percent in the October-December quarter.

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CAD means that the total expenditure on imports of a country exceeds the income from its exports. The difference between these two is called cad. RBI has said that the main reason for the reduction in CAD in the last quarter of the last financial year is the reduction in trade deficit and the ban on going to the foreign market of primary income.

Trade deficit reduced due to increasing exports

The country’s trade deficit in goods stood at $54.5 billion in the first quarter of 2022, from $59.8 billion a quarter earlier. This decrease has come due to the boom in exports. India’s trade is surplus on the service front. That is, we export more services and imports are very less. The service trade surplus reached $28.3 billion in January-March, from $27.8 billion in the year-ago period.

Common man also has a big role

RBI has told that the common man has also played a big role in reducing the current account deficit of the country. During the January-March quarter, a total of $8.4 billion in primary income went to the foreign market, which was $ 11.5 billion till a quarter ago. Primary income refers to the salary and other allowances received by the employees and income from investments.

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Highest cad in three years on annual basis

If we look at the current account deficit on an annual basis, it has increased to a three-year high in 2021-22. The total CAD stood at $38.7 billion in the last financial year. However, the trade deficit also nearly doubled in the same period. Last fiscal, the total trade deficit stood at $189.5 billion, up from $102.2 billion a year ago.

what is the effect on the economy

The RBI said that the growth rate will also be affected by the burden of the country’s increasing import bill. Also, due to more import of expensive crude oil and other commodities in the global market, inflation will also increase. In the last financial year, the total CAD as compared to GDP stood at 1.2 percent, which was 0.9 percent till a year ago. Earlier in the year 2018-19, the country’s CAD was $57.3 billion.

Tags: Import-Export, RBI, Trade Margin

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