01 January, 2020
Syllabus subtopic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
Prelims and Mains focus: about the Current Account Deficit (CAD) and the reasons for it narrowing down this fiscal: about External Commercial Borrowings (ECBs)
News: India’s current account deficit (CAD) narrowed to 0.9% of GDP, or $6.3 billion, in the September 2019 quarter, on account of lower trade deficit. It had stood at 2.9% of the gross domestic product (GDP), or $19 billion, in the corresponding quarter of 2018-19.
On a sequential basis, CAD had printed 2% of GDP, or $14.2 billion, in the June 2019 quarter. “The contraction in the CAD was primarily on account of a lower trade deficit at $38.1 billion as compared with $50 billion a year ago,” the Reserve Bank of India (RBI) said in a release on Tuesday.
Yearly trend of various parameters in 2019 vis-à-vis 2018
About Balance of Payments (BOP)
Balance of Payment is systematic record of overall international economic transactions during specific time period
Components of the Balance of payments (BOP)
The components of the balance of payment are:
Current account: It includes the financial transactions dealing with the export and import of goods, services, unilateral transfers, investment income etc.
Capital account: It includes the financial transactions dealing with assets such as foreign direct investment, foreign portfolio investment, foreign loans etc.
Official reserve transactions: It conducted by the central bank in case of the BOP deficit or BOP surplus.
Errors and omissions: It is the element of BOP (other than the current account and the capital account) which refers to the balancing items reflecting the inability to record all the international financial transactions.
Source: The Hindu
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