Current Account Deficit India
Report for Macroeconomics by Group 5
“Current Account Deficit – An Indian Perspective”
Indian Institute of Management, Kozhikode
Report by:
GROUP 5:
Aishwarya Kumar (063)
Anirban Bhar (064)
Anusha Acharya (071)
Nimish Shah (110)
Palak Bansal (097)
Pratik Agarwal (101)
Table of Contents Introduction 3 India CAD – Historical perspective (1991 – present) 7 Case Study 1 - US Current Account Deficit and the 2008 Financial Crisis 12 Case Study 2 - Brazil: A unique transition from current account surplus to current account deficit 14 Appendix: 16 References 17
Introduction
In economics, the Current Account is one of the two components of the balance of payments. The other component is the Capital Account. Current account is the sum of 1) Balance of Trade (net revenue on exports minus payments for imports), 2) Factor Income (earnings on foreign investments minus payments made to foreign investors) and 3) Cash Transfers The current account balance is considered a major measure of the nature of a country 's foreign trade. It is called the current account as the goods and services are consumed in the current period. In the case of a current account surplus, a country 's net foreign assets are increased by the corresponding amount, and in case of a Current Account Deficit (CAD), the reverse occurs. Government and private payments are both included while calculating the CAD. The balance of trade is the difference between a nation 's exports of goods and services and its imports of goods and services. A nation is said to have a trade deficit if it imports more than it exports ignoring transfer payments and investments. Since the trade balance is generally the largest component of the current account, positive net exports are accompanied by a current account surplus. But, this is not always the case especially with secluded or somewhat closed economies which may have an income deficit
“Current Account Deficit – An Indian Perspective”
Indian Institute of Management, Kozhikode
Report by:
GROUP 5:
Aishwarya Kumar (063)
Anirban Bhar (064)
Anusha Acharya (071)
Nimish Shah (110)
Palak Bansal (097)
Pratik Agarwal (101)
Table of Contents Introduction 3 India CAD – Historical perspective (1991 – present) 7 Case Study 1 - US Current Account Deficit and the 2008 Financial Crisis 12 Case Study 2 - Brazil: A unique transition from current account surplus to current account deficit 14 Appendix: 16 References 17
Introduction
In economics, the Current Account is one of the two components of the balance of payments. The other component is the Capital Account. Current account is the sum of 1) Balance of Trade (net revenue on exports minus payments for imports), 2) Factor Income (earnings on foreign investments minus payments made to foreign investors) and 3) Cash Transfers The current account balance is considered a major measure of the nature of a country 's foreign trade. It is called the current account as the goods and services are consumed in the current period. In the case of a current account surplus, a country 's net foreign assets are increased by the corresponding amount, and in case of a Current Account Deficit (CAD), the reverse occurs. Government and private payments are both included while calculating the CAD. The balance of trade is the difference between a nation 's exports of goods and services and its imports of goods and services. A nation is said to have a trade deficit if it imports more than it exports ignoring transfer payments and investments. Since the trade balance is generally the largest component of the current account, positive net exports are accompanied by a current account surplus. But, this is not always the case especially with secluded or somewhat closed economies which may have an income deficit
References: 11. Report of the Sub-Group on Inflow of Foreign Savings: Twelfth Five-Year Plan (2012-13 to 2016-17) 12