CURRENT

ACCOUNT
DEFICIT Group Number 5
Shubham Gaba PGP/20/294
Shantanu Sharma PGP/20/293
Vivek Babu PGP/20/367
Sachit PGP/20/368
Himanshu Verma PGP/20/369
Ankur Sharma PGP/20/370
Balance of payments

Current Account Deficit (Surplus) is balanced by Capital Account

Surplus (Deficit)
If Current Account Deficit is balanced by loans than long term interest
payments can hamper future growth
If Current Account Deficit is balanced by Long term investments, then
it creates more job opportunity and economic growth
 India vs China
India China
35 40
30 35

25 30

20 25

15 20

10 15
10
5
5
0
0

% imports of GDP % exports of GDP

% imports of GDP % exports of GDP

Source :
http://data.worldbank.org/
Current Account around the
world

CumulativeCurrent Account Balance 19802008 (US$ Billions) based on theIMF data

source :
https://en.wikipedia.org/wiki/Current_account#OECD_Quarterly_International_Trade_Sta
 Indias development over the
years
India posted a
current account
deficit of $300
million, or 0.1
percent of GDP, in
the second quarter
of 2016 compared
to a $6.1 billion
gap, or 1.2 percent
of GDP, in the
same period a year
ago but missing
expectations of a
$4 billion surplus
Indias share of Exports and
Imports
Dasd
 CAUSES
Major reasons for High Current Account Deficit in India
High imports Crude oil
Domestic
production fell for
the fourth straight
year in 2015-16.
Oil consumption
rocketed 11%,
pushing up India's
import
dependence.
Drove up
consumption to
183.5 from 165.5
mmt in the
previous year. In
comparison, India
produced just
36.9 mmt of
crude oil in 2015-
16, lower than
37.5 mmt in the
previous year

Source: https://data.gov.in/visualize/?inst=38fa2a0efb4d6f0fd17cd357358d4b81&vid=487
 Recent Trends
Oil imports in May, at
$8.5 billion, were 41
per cent lower than
what they were in May
2014, marking the
eighth straight month
of contraction.

This fall in the value

of imports was driven
by falling prices rather
than a dip in volumes
imported.

Source:- http://www.thehindu.com/data/what-do-indias-latest-export-and-import-figures-tell-us/article7326453.ece
 High Imports - Gold

In 2001 India imported

12.27% of the total
production. In 2012,
India imported 26.12%
of total world
production.
In 2005-06, gold
imports were less than
$11 billion, but within
the next six years, its
imports had increased
to nearly $57 billion,
or nearly 12% of the
import bill.
 Recent Trends
Gold imports
increased 10.5 per
cent over their May
2014 figures, but
this is far lower than
the 78.3 per cent
growth seen in
April.

The increase in the

value of gold
imports was driven
more by volumes
than by the price of
gold.

Source:- http://www.thehindu.com/data/what-do-indias-latest-export-and-import-figures-tell-us/article7326453.ece
 Coal trends up till
2015
As per provisional government figures,
India's 200 MT of coal imports last fiscal
included 43.50 million tonne of coking coal
and 156.38
million tonne non-coking or thermal coal.
This financial year (2016-17), the govt. had

imported over 35 million tonne coal by the

end of May.

Our imports of coal have significantly

increased that have led to the widening of
current account deficit.

The government allotted quotas of coal

mining to those who had no experience of
mining coal and there has been coal scam
involving thousands of crores which has
worsened domestic coal- supply scenario.

Reference: http://coal.nic.in/content/production-supplies
COAL Trends of the present

Country's coal imports have declined 5 per cent in the first two months of 2016-17
and the number is expected to reach 160.16 million tonnes in the ongoing fiscal.
On account of increased production by Coal India Ltd (CIL), which produces around 80
per cent of coal in the country, the import of fossil fuel has fallen from 217.78 million
tonnes in 2014-15 to 199.88 million tonnes in 2015-16.

2015-16(Prov.) 2016-17*

Total Coal Import 199.88 35.09

*data upto May 2016

Reference: http://coal.nic.in/content/production-supplies
 INDIAs Exports Up To
2015
Exports from India amounted to
US$264 billion in 2015, down
-12.4% since 2011 and down
-16.9% from 2014 to 2015.

India is currently losing about

70% of all incremental voice and
call centre business to Shares of Major Services Sectors in Exports of
competitors like Philippines and Services (%) Travel
the eastern Europe. Years Financial Communicati
services on services

Its share has declined from a 2006-07 13.6 4.2 3.1

high of nearly 52% of exports in 2007-08 12.6 3.6 2.7
2009-10 to just about 45% in
2012-13. 2008-09 10.3 4.2 2.2
2009-10 12.3 3.8 1.3
Travel, Financial services and
2010-11 12.7 5.2 1.3
Communication services have
seen a dip in the percentage of 2011-12 13 4.2 1.1
exports. 2012-13 12.4 3.4 1.2
Export trends of the present
Indias export and import (EXIM) containerised trade reported 10 per cent growth
in the July-September quarter (Q3) due to imprvement in the economies and
growing demand in key export markets

While exports to the U.S. and Europe remained steady, an increased demand from
Latin America, Far East and South Africa contributed to the overall export growth
of 9 per cent

This is driven by stability in the U.S. market, ongoing improvement in the

European economy and growth in emerging markets such as Latin America with
exports to Brazil nearly doubling this quarter as compared to the same quarter last
year

Increased demand has been seen from Egypt, South Africa, Algeria and Brazil 0for
automobiles, U.S. for garments and metals and Vegetables and fish from Saudi
Arabia.
WAYS TO REDUCE
CAD
mproving Trade Performance in the Short and Long Ru

1) Supply-Side Improvements

Policies to raise productivity,measures to bring about more

innovation and incentives to increase investment in industries with
export potential are supply-side measures designed to boost exports
performance and compete more effectively with imports. The time-lags
for supply-side policies to have an impact are long.
Policies to encourage business start-ups successful small
businesses with export potential
Investment in education and health-careto boost human capital
and increase competitiveness in fast-growing and high value industries
such as bio-technology, engineering, finance, medicine
Investment in modern critical infrastructureto support businesses
and industries involved in international markets
mproving Trade Performance in the Short and Long Ru
Government policy towards enhancing trade with existing partner
countries and establishing new relationships with developing
countries in Asia, Africa and Latin America would also help promote
exports to these regions. Export of auto components is rising and
with supportive policy initiatives, India could emerge as a regional
hub for sourcing components for global automakers
Increase in FDI will also help subdue the CAD. With more cash
inflows, India can cope up to manufacture more which will reduce the
import dependence of the nation
mproving Trade Performance in the Short and Long Ru
2) Deflationary Fiscal Policy
This involves higher tax and lower government spending. Higher tax reduces
consumers disposable income leading to a decline in consumer spending and
less spending on imports. Also, the deflationary fiscal policy helps reduce
inflation and thereby improve the competitiveness of exports. (However, higher
interest rates would cause an appreciation in the exchange rate and worsen the
trade deficit).

3) Devaluation Of The Exchange Rate

When a nations currency weakens exports become more competitive

and imports more expensive, we should see higher exports and lower
imports, which will reduce the current account deficit. But after
devaluing, inflation tends to increase in the short run, which has to be
monitored to maintain disruption in the economy