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Current Account Deficit


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This Presentation deals With:
What is a Current Account ,
Current Account Balance
Deficit In Current Account Balance.
Current Account Deficit In India,
Causes for Current Account Deficit,Impact Of Deficit,
India's Position.etc

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Current Account Deficit

  1. 1. Current Account Deficit
  2. 2. Objectives  To Know about Current Account  Current Account Balance  Deficit or Surplus in Current Account Balance  Components of Current Account  Current Account Deficit in India  Causes Of Current Account Deficit  Impact Of Current Account Deficit
  3. 3. Current Account  Current Account is a part of balance of payments.  Current account records transactions of Goods,Services,Transfers,and Net income of a country with the rest of the world.
  4. 4. Current Account Balance  It is difference between the receipts and payments on account of current account which includes trade balance. There can be either surplus or deficit balance in current account. A Current account Deficit takes Place when the Debits (Payments) are more than the Credit(receipts).  A Current Account Surplus Takes Place When the Credits are More than the Debits.
  5. 5. Current Account Deficit  Current account deficit occurs when a country’s total imports are greater than the country’s total exports. This situation makes a country a net debtor to the rest of the world. Total Import  Total Export Current Account deficit are Usually Measured as a Percentage of GDP.
  6. 6. Components Of Current Account 1. Trade Balance or Balance of Trade.(A) 2. Earning From Investment.(B) 3. Direct Transfers.(C)
  7. 7. Current Account 1.Balance Of Trade (A)  It is the difference between the monetary value of exports and imports of goods in an economy over a certain period of time. BOT = Exports- Imports
  8. 8. Current Account 2.Earnings From Investment (B)  Foreigners invest their money in India through FDI and FII. Similarly, Indian’s also invest their money abroad. The investors earn an income in the form of Interest,Dividend.etc
  9. 9. Current Account 3.Cash Transfers (C)  Cash transfer is the money that is transferred without any exchange of goods or services. One-sided Receipts/Payments. Current Account =A+B+C
  10. 10. Causes Of Current Account Deficit in INDIA  High Consumption  Heavy Import Of Oil  Gold Imports  Low Exports  Decrease In FDI  Low Savings  Other non-essential imports  Natural Disasters/ Crisis
  11. 11. Impact Of Deficit  Slow Growth of Economy  Unemployment  High rate of Inflation
  12. 12. India’s Current Position  Economic growth of India has slowed to 5 per cent(4.8 %) in 2012-13 against 6.2 per cent in the previous fiscal. Government has taken measures, such as to hike gold import duty to 10%,increasing Export, increasing capital flow in the country,
  13. 13.  Current Account deficit may not be always bad for an economy, it may be good at the developing stages and bad at the developed stage if it is in the long-run.
  14. 14. Thank you