Current account deficit to moderate in FY24: Report

The current account deficit (CAD) will average 1.8 per cent of GDP in 2023-2024 compared with 2.0 per cent of GDP in 2022-2023, according to a report by Crisil today. Current account deficit is said to occur when the value of country’s imports of goods and services is greater than its exports. 

“Lower international commodity prices year-on-year and support from healthy services exports and remittances will help CAD narrow this fiscal,” the report read. According to the report, the CAD rose to 1.1 per cent of GDP in the first quarter of fiscal 2024 from 0.2 per cent of GDP in the previous quarter. Economists believe that strong services surplus along with resilient remittances is cushioning the impact of increasing trade deficit. 

India's current account deficit (CAD) dropped from $17.9 billion (2.1 per cent) in Q1 of 2022-23 to $9.2 billion (1.1 per cent of GDP) in Q1 of 2023–24, according to a release from the RBI, but it was still greater than $1.3 billion (0.2 per cent of GDP) in the preceding quarter.

Despite the increase in the trade deficit, economists and experts believe that the current account deficit is likely to be about 1.4 per cent to 2 per cent of GDP. In 2022-23, CAD was $67 billion, or 2 per cent of that year’s GDP.