CAD declined to 0.9 percent of GDP in Quarter 3 of 2013-14

Current Account Deficit (CAD) declined to 0.9 percent of Gross Domestic Product (GDP) in Quarter 3 (October - December) of 2013-14. This was revealed by the Report on Developments in India’s Balance of Payments released by Reserve Bank of India (RBI) on 5 March 2014. Also, as per the report CAD reached to its lowest in the past eight years.

Other highlights of the Report:

•    Rising exports and moderation in gold imports have pulled down India's current account deficit (CAD) sharply to 4.2 billion dollar in Quarter 3 of 2013-14.

•    The export was increased due to the significant growth especially in the exports of engineering goods, readymade garments, iron ore, marine products and chemicals.

•    On the other hand, merchandise imports recorded a decline of 14.8 per cent at 112.9 billion dollar in Q3 of 2013-14.

•    Decline in imports was primarily led by a steep decline in gold imports. This was amounted to 3.1 billion dollar as compared to 17.8 billion dollar in Q3 of 2012-13.

•    The declined in CAD was happened due to government imposed curbs on gold imports and the Reserve Bank of India's subsidy for Non-Resident Indian's US dollar deposits.

•    CAD narrowed to 31.1 billion dollar or 2.3 per cent of GDP in April-December 2013 from 69.8 billion dollar or 5.2 percent of GDP in April-December of 2012.

•    The CAD reflects the difference between inflow and outflow of foreign currency. It stood at 31.9 billion dollar or 6.5 per cent of GDP in October-December quarter of 2012-13.

•    On a Balance of Payment (BoP) basis, merchandise exports increased by 7.5 per cent at 79.8 billion dollar) in Q3 of 2013-14. The quantum of export was 3.9 per cent in Q3 of 2012-13.

About Current Account Deficit (CAD):
A measurement of a country’s trade in which the value of goods and services it imports exceeds the value of goods and services it exports.

The current account also includes net income, such as interest and dividends, as well as transfers, such as foreign aid, though these components tend to make up a smaller percentage of the current account than exports and imports.

The current account is a calculation of a country’s foreign transactions, and along with the capital account is a component of a country’s balance of payment.