InvestorQ : Why is the current account deficit in India so much in the debate nowadays?
vidhya Laxmi made post

Why is the current account deficit in India so much in the debate nowadays?

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sarah Leo answered.
4 weeks ago
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The big news in the last few days has been the falling rupee. However, behind the story of the falling rupee there are numerous reasons, and one of the less talked about reasons is the spike in the current account deficit. The current account is a combination of the merchandise trade account, trade in services and regular flows like dividends and interest. The net gap in trade in goods and services is the key factor in the current account gap. While flows do exist, they offset each other. That is largely due to tepid IT exports.

As a result, the real issue is the net gap between trade in merchandise goods and services. The Indian economy runs a large merchandise trade deficit which is partially offset by services surplus. In the last few months, this gap widened sharply due to the sharp spike in imports. The reason was the price rise in crude oil and other minerals. However, the export of services has been relatively subdued due to the global IT spending being impacted by the expected recession. This is likely to result in a spike in the current account deficit.

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