Current account deficit or CAD, is an assessment of a country's foreign trade, in which the value of goods and services imported is greater than the value of goods and services exported. Current account represents a country's foreign transactions. Current account includes net income like interest, returns including dividends and so on, and net transfers including foreign aid extended.
CAD represents negative foreign sales of a country. If the current account balance is less than zero, then it is said to be in deficit, if not, it is in surplus. Developed countries like United States usually run current account deficits, while emerging countries often run current account surpluses. China has a trade surplus with the USA.
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India traditionally has current account deficit, as the value of its imports is way higher than the value of its exports. India mainly imports crude oil from gulf countries. India is one of the top 5 crude oil importers. Gold is another commodity that is imported in a large quantity.
India mainly exports gems, mineral fuels, machinery and organic chemicals. The Indian export business is not something to boast of. The Indian export base is facing stiff competition from Chinese counterparts who outplay Indian products when it comes to pricing. India is improving trade relations with its neighboring countries to promote exports.
India mainly exports its products to USA, gulf countries and UK. Indian products are not getting bigger market share in foreign countries due to their internal policies which is curbing down globalization and stressing on promoting domestic goods and services over foreign goods and services.
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Trade balance is either surplus or deficit of a country that runs on exports and imports of goods and services with rest of the world.
Current account balance is the sum of trade balance and surplus or deficit of a country that runs on investment income from rest of the world.
Any surplus or deficit on the current account is matched by an equal and opposite balance on the capital account, reflecting an increase in net claims on the rest of the world for a country with a current account surplus or a decrease in net claims on the rest of the world for a country with a current account deficit.
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