Current account deficit: The current account deficit (CAD) measures the difference between imports and exports (of goods and services). A high CAD in the balance of payments is harmful for a country because it stunts growth.
According to the Reserve Bank of India, a CAD of 2.5 per cent of the gross domestic product is ideal. India posted its second highest ever monthly trade deficit of $20 billion in January as imports surged to record highs. The CAD hit an all-time high of 5.4 per cent of gross domestic product in the July-September quarter due to slowing exports and heavy oil and gold imports.
India will have to pursue domestic policy initiatives to help achieve any near-term improvement in current account deficit as global growth may only be slightly better in 2013 and commodity prices are unlikely to ease sharply, Moody's Investor Service has said.
According to the Reserve Bank of India, a CAD of 2.5 per cent of the gross domestic product is ideal. India posted its second highest ever monthly trade deficit of $20 billion in January as imports surged to record highs. The CAD hit an all-time high of 5.4 per cent of gross domestic product in the July-September quarter due to slowing exports and heavy oil and gold imports.
India will have to pursue domestic policy initiatives to help achieve any near-term improvement in current account deficit as global growth may only be slightly better in 2013 and commodity prices are unlikely to ease sharply, Moody's Investor Service has said.
