In News
- India’s trade deficit, which shot back up to $21.2 billion, is expected to stay elevated in coming months and the current account deficit could widen to 2.6% of GDP in 2022-23 from 1.7% of GDP this year.
What is Trade Deficit?
- It refers to a situation where the country’s import dues exceed the receipts from the exports.
- Trade deficit arises in the course of international trade when the payments for imports exceed the receipts from export trade.
- A trade deficit is also referred to as a negative balance of trade.
What is Current Account Deficit (CAD)?
- It is the shortfall between the money flowing in on exports, and the money flowing out on imports.
- It measures the gap between the money received into and sent out of the country on the trade of goods and services and also the transfer of money from domestically-owned factors of production abroad.
- It is slightly different from the Balance of Trade, which measures only the gap in earnings and expenditure on exports and imports of goods and services.
- Whereas, the current account also factors in the payments from domestic capital deployed overseas.
- For example, rental income from an Indian owning a house in the UK would be computed in the Current Account, but not in the Balance of Trade.
Reasons of Surge in TD & CAD
- The surge in oil prices, amid a pickup in domestic demand, will significantly enhance India’s import bill.
- Aided by the broader rise in commodities and fertilizers.
- Anticipation that gold imports will remain high as investors look to hedge against market volatility and inflation.
- The situation is especially aggravated by the ongoing Russia-Ukraine conflict.
Source: TH
Previous article
Rules for Deputation of DIGs
Next article
Village defence groups for JK
