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Current account deficit widens to 2.9% in Q2
Why is it in the news ?
- As per new Reserve Bank of India data, current account deficit (CAD) widened to 2.9% of GDP for the July-September quarter due to higher trade deficit.
- CAD was reported 1.1% during the same period of the previous year.
More in the news
- The deficit for the second quarter was $19.1 billion compared with $6.9 billion in the year-earlier period.
- The CAD for the April-June quarter was 2.4% of GDP or $15.9 billion.
- The deficit widened due to sharp rise in oil prices. But now prices have corrected 31% from peak levels.
- Additionally, gold imports rose by 61 per cent to $9 billion in the September quarter, from $6 billion in the year-ago period.
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 goods and services it exports.
- The current account represents a country’s foreign transactions and, like the capital account, is a component of a country’s balance of payments.
- While a current account deficit can imply that a country is spending “beyond its means," having a current account deficit is not inherently disadvantageous.
- If a country uses external debt to finance investments that have a higher return than the interest rate on the debt, it can remain solvent while running a current account deficit.
Source
The Hindu.