A Trend Analysis of Current Account Deficit and Its Determinants in India

Abstract

The growing requirement of India getting more integrated with the worldwide economy is pushing India’s engagement in International trade. India’s external sector continued to be buoyant and robust in 2017-18, as witnessed in the Economic Survey 2017-18. The cross border uncertainty in the financial markets has transmitted through the various channels such as trade, finance, and confidence. Due to globalization, the developing countries like India experiences detrimental pressure on its Balance of Payment (BoP). India’s balance of payments situation, which has been relaxed since 2013-14, sustained to be so in the first half of 2017-18, in spite of some growth in the Current Account Deficit (CAD) in the first quarter, with a relatively lower CAD in the second quarter. India’s CAD stood at US$7.2 billion (1.2 percent of GDP) in Q2 of 2017-18, narrowing sharply from US$ 15.0 billion (2.5 percent of GDP) in the preceding quarter. The objective of this study is to identify and analyze the factors that influence the country’s Current Account Deficit. Research Methodology - This paper is based on secondary data, which is collected through various sources like report of RBI, IMF, and Economic Survey etc. This paper also explains the link between trade imbalances factors and its effect on current and capital accounts of Indian Balance of Payment.