What is current account deficit

A Current Account Deficit (CAD) occurs when the total value of goods and services a country imports, along with net income payments and transfers, exceeds the value of its exports. In India, it is a key indicator of economic health, measured as a percentage of the Gross Domestic Product (GDP). It primarily consists of:

• Trade Gap: The difference between exports and imports of merchandise and services.
• Net Income: Interest, profits, and dividends from foreign investments.
• Transfers: Remittances sent by individuals or official government aid.

A persistent or high CAD can lead to rupee depreciation and increased inflation.