Current Account

Annual Balance
% of GDP

A nation's current account records its transactions with the rest of the world - specifically its net trade in goods and services, net earnings on cross-border investments, and its net transfer payments over a defined period of time. A positive current account balance (surplus) indicates the nation is a net lender to the rest of the world, while a negative current account balance (deficit) indicates that it is a net borrower from the rest of the world. A current account surplus increases a nation's net foreign assets by the amount of the surplus, and a current account deficit decreases it by that amount.

Factors impacting the Current Account:

  • Trade Balance - During a strong economic expansion, import volumes typically surge. However, if exports do not grow proportionately, the current account deficit widens. Conversely, during a recession, the current account deficit shrinks if imports decline and exports increase.
  • Exchange Rate - Exports and Imports are hugely affected by the prevailing exchange rate and thus, by extension, impact the current account. An overvalued currency makes imports cheaper and exports less competitive, thereby widening the current account deficit. On the other hand, an undervalued currency boosts exports and makes imports more expensive, thus increasing the current account surplus or narrowing the deficit.

During periods of economic uncertainty, a nation with persistent current account deficits comes under increased investor scrutiny and its currency is prone to speculative attacks. This creates a vicious circle in which foreign exchange reserves are depleted to support the domestic currency. This, in addition to a deteriorating trade balance puts further pressure on the currency forcing nations to take stringent measures to support the currency by raising interest rates and restricting currency outflows.

A nation's current account records its transactions with the rest of the world - specifically its net trade in goods and services, net earnings on cross-border investments, and its net transfer payments over a defined period of time. A positive current account balance (surplus) indicates the nation is a net lender to the rest of the world, while a negative current account balance (deficit) indicates that it is a net borrower from the rest of the world. A current account surplus increases a nation's net foreign assets by the amount of the surplus, and a current account deficit decreases it by that amount.

Factors impacting the Current Account:

  • Trade Balance - During a strong economic expansion, import volumes typically surge. However, if exports do not grow proportionately, the current account deficit widens. Conversely, during a recession, the current account deficit shrinks if imports decline and exports increase.
  • Exchange Rate - Exports and Imports are hugely affected by the prevailing exchange rate and thus, by extension, impact the current account. An overvalued currency makes imports cheaper and exports less competitive, thereby widening the current account deficit. On the other hand, an undervalued currency boosts exports and makes imports more expensive, thus increasing the current account surplus or narrowing the deficit.

During periods of economic uncertainty, a nation with persistent current account deficits comes under increased investor scrutiny and its currency is prone to speculative attacks. This creates a vicious circle in which foreign exchange reserves are depleted to support the domestic currency. This, in addition to a deteriorating trade balance puts further pressure on the currency forcing nations to take stringent measures to support the currency by raising interest rates and restricting currency outflows.

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SUBJECT Variables
A nation's current account records its transactions with the rest of the world - specifically its net trade in goods and services, net earnings on cross-border investments, and its net transfer payments over a defined period.
Current Account | India | 2013 - 2023 | Data, Charts and Analysis
Current and historical data on India's Current Account and comparison with global peers.
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01/04/2013 To 30/06/2023
Annual Balance
% of GDP
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Annual Balance
% of GDP
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ANNUAL BALANCE
Annual Amount
Source: Reserve Bank of India
Positive balance indicates a surplus and negative balance indicates a deficit
  • India reported a current account deficit of USD 67 billion in 2022-23, a significant increase from a deficit of USD 38.7 billion a year earlier. This effectively means that India was unable to offset its payments obligations for imports and cross-border investments through its own exports and foreign inflows.
  • The current account balance deeper into the deficit territory on the back of a sharp expansion of USD 87.3 billion in the trade deficit - from USD 189.6 billion in 2021-22 to USD 265.3 billion in 2022-23.
  • Barring 2020-21, India has reported a current account deficit since 2013-14 due to a combination of factors - imports being higher than exports, an overvalued currency which in turn makes imports cheaper and exports less competitive, higher payments for overseas investments than investment inflows into the country, etc.
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Composition
Source: Reserve Bank of India
Positive balance indicates a surplus and negative balance indicates a deficit

Goods or Trade balance: Net imports of goods, excluding exports.

  • International trade in 2022-23 resulted in a deficit of USD 265.3 billion - an 40% jump from USD 189.5 billion a year ago.

ServicesNet imports of services (non-goods), excluding exports.

  • The surplus in non-trade (services) increased by 33% to USD 143.3 billion in 2022-23, from USD 107.5 billion a year ago.

Primary Income: This is the net flow of profits and dividends from investments in other countries, and net remittance flows from migrant workers.

  • Primary income deficit in 2022-23 increased by 23% to USD 45.9 billion, from USD 37.3 billion a year ago.
  • Net FDI (Foreign Direct Investment) inflows in 2022-23 were USD 28 billion, in comparison to USD 38.6 billion a year ago.
  • Net FPI (Foreign Portfolio Investment) recorded an outflow of USD 5.2 billion in 2022-23 compared to USD 16.8 billion a year ago.
  • In 2022-23, there was a depletion of USD 9.1 billion to foreign exchange reserves (on BoP basis)

Secondary Income: This is the net income generated by Indians via foreign trade after adjusting for all taxes and refunds.

  • Secondary income resulted in a surplus of USD 100.9 billion in 2022-23, a 9.5% increase from USD 80.5 billion in 2021-22.
  • As per the statement by RBI, net invisible receipts in 2022-23 were higher primarily due to increase in net exports of services and net private transfer receipts, even though net income outgo was higher than a year ago.
  • Net External commercial borrowings (ECB) to India recorded an outflow of USD 4.1 billion in 2022-23 compared to an inflow of USD 7.4 billion in 2021-22.
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QUARTERLY BALANCE

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