RBI: India's CAD narrows
Q. RBI has indicated that India's CAD has narrowed due to contraction in the _____ deficit.- Published on 19 Jun 17a. Fiscal
b. Monetary
c. Trade
d. None of the above
ANSWER: Trade
According to Reserve Bank of India (RBI), India’s current account deficit (CAD) narrowed during 2016-17 fiscal owing to a contraction in the country’s trade deficit.
The CAD for the last fiscal narrowed down to 0.7% of the GDP from that of 1.1% in 2015-16 due to contraction in the trade deficit.
Country’s trade deficit narrowed down to $112.4 billion in 2016-17 from $130.1 billion in 2015-16.
Further, the net FDI (Foreign Direct Investment) inflows in 2016-17 also got narrowed to $35.6 billion from $36 billion during 2015-16.
Current Account: Know More - The current account is the net difference between inflows and outflows of foreign currencies.
- Current Account transactions increase or decrease national income.
- It includes all transactions of export and import of goods and services, investment income, and unilateral transfers.
- It consists of two major items (a) merchandise exports (credit to home country) and imports (debit to home country) (b) invisible exports (sale of services) and imports (purchase of services).
- If the sum of all these transactions is negative then it is called as current account deficit.
