Factors Responsible for Widening of Current Account Deficit

India’s current account deficit (CAD) at US$ 3.4 billion (0.6 per cent of GDP) in Q4 of 2016-17 was higher than US$ 0.3 billion (0.1 per cent of GDP) in Q4 of 2015-16 but narrowed from US$ 8.0 billion (1.4 per cent of GDP) in the preceding quarter. For 2016-17 full year, the current account deficit (CAD) narrowed down to 0.7 per cent of GDP from 1.1 per cent of GDP in 2015-16. Quarterly data on India’s CAD are given in Table 1.

Table 1:  India's Current Account Balance

 The widening of the CAD in Q4 of 2016-17 on a year-on-year (y-o-y) basis was on account of a higher trade deficit (US$ 29.7 billion) due to a larger increase in merchandise imports relative to exports. High increase in imports of Petroleum, Oil & Lubricants (POL) and gold & silver imports led to the rise in imports in Q4 of 2016-17. Despite the widening in Q4 of 2016-17, the CAD is low and within manageable limits. The Government and the RBI closely monitor the emerging external economic situation including CAD and calibrate policies on an on-going basis.

This was stated by Shri Arjun Ram Meghwal, Minister of State for Finance in written reply to a question in Rajya Sabha today.