Impact of Merchandise Trade on Current Account Deficit in India
Author : Anil Kumar Nagar
Abstract :
Although the World economy is continuing to expand at a good pace, the persistence of large fiscal and external imbalances clouds the international economic outlook. No country remains untouched by the international economic events. A country's balance of payment (BOP) is a detailed accounting of all economic transactions that took place within a specific time period between its citizens and others across the world. Balance of payment includes currents account and capital account. Current account deficit is a result of current account imbalance. CAD occurs when a country's total imports of goods, services and transfers are greater than countries total exports of goods, services and transfers. The balance of trade takes into account only the merchandise items and neglects services exports and capital flow. Imports have always been greater than exports. Thus it was found that imports of India are consistently higher from exports and it results as a negative trade deficit on regular basis. The main cause of the current account deficit is a trade deficit. The economy, stock markets, and investments are impacted by CAD. The trade deficit must be closed by making a more concerted effort to increase exports and control imports through the thoughtful removal of unnecessary or interchangeable goods.
Keywords :
Balance of payment, trade deficit, exports, imports, current account balance
