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INDIA’S CURRENT ACCOUNT DEFICIT EASES TO 0.2% OF GDP

Focus: GS-III Indian Economy, Economic Development, Prelims

Why in news?

India’s current account deficit almost got wiped out in the December quarter standing at just $1.4 billion due to lower trade deficit and a rise in net services receipts, according to data released by Reserve Bank of India on 12th March 2020.

Details

Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $20.6 billion, up by 9% from their level a year ago. In the financial account, net foreign direct investment at $10.0 billion was higher than $7.3 billion in Q3 of 2018-19. Foreign portfolio investment recorded net inflow of $7.8 billion – as against an outflow of $2.1 billion in Q3 of 2018-19 – on account of net purchases in both the debt and equity market.

Fiscal Deficit

  • A fiscal deficit is a shortfall in a government’s income compared with its spending. The government that has a fiscal deficit is spending beyond its means.
  • A fiscal deficit is calculated as a percentage of gross domestic product (GDP), or simply as total dollars spent in excess of income.
  • In either case, the income figure includes only taxes and other revenues and excludes money borrowed to make up the shortfall.

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.
  • The current account includes net income, such as interest and dividends, and transfers, such as foreign aid, although these components make up only a small percentage of the total current account.
  • 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).



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July 2022
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