RBI: India’s Current Account Deficit narrowed in 2016-17
According to Reserve Bank of India (RBI), India’s current account deficit (CAD) narrowed during 2016-17 fiscal owing to a contraction in the country’s trade deficit. The CAD for the last fiscal narrowed down to 0.7% of the GDP from that of 1.1% in 2015-16 due to contraction in the trade deficit. Country’s trade deficit narrowed down to $112.4 billion in 2016-17 from $130.1 billion in 2015-16.
Further, the net FDI (Foreign Direct Investment) inflows in 2016-17 also got narrowed to $35.6 billion from $36 billion during 2015-16.
Current Account Deficit
The current account is the net difference between inflows and outflows of foreign currencies. Current Account transactions increase or decrease national income. It includes all transactions of export and import of goods and services, investment income, and unilateral transfers. It consists of two major items (a) merchandise exports (credit to home country) and imports (debit to home country) (b) invisible exports (sale of services) and imports (purchase of services). If the sum of all these transactions is negative then it is called as current account deficit (CAD)