Sakshi Education
By Srirangam Sriram, Sriram's IAS, New Delhi.
The current account of a country includes all external financial transactions excluding loans and investment. It means it includes trade in goods and services and others like remittances. Almost as a norm, India had a current account deficit for many decades due to its economic growth needing energy imports; and also because India is not a global export powerhouse.
But, India's current account surplus increased to $19.8 billion or 3.9 per cent of GDP for the June quarter as merchandise imports declined amid the COVID-19 pandemic.
The country's current account surplus had come at $0.6 billion or 0.1 per cent of GDP in the preceding March quarter.
The surplus in the current account was on account of a sharp contraction in the trade deficit to $10 billion due to steeper decline in merchandise imports relative to exports on a year-on-year basis.
The current account balances are considered as an important indicator of a country's external sector.
Even as merchandise exports fell due to global lockdown, net services receipts remained stable primarily on the back of net earnings from computer services.
Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $18.2 billion which is a decline of 8.7 per cent from their level a year ago.
Current account surplus is good if a robust and globally competitive economy exports more than it imports. But in the case of India, we need to import for making our exports competitive. Imports are also a sign of growth. Therefore, surplus in the case of India need not be welcomed.
But, India's current account surplus increased to $19.8 billion or 3.9 per cent of GDP for the June quarter as merchandise imports declined amid the COVID-19 pandemic.
The country's current account surplus had come at $0.6 billion or 0.1 per cent of GDP in the preceding March quarter.
The surplus in the current account was on account of a sharp contraction in the trade deficit to $10 billion due to steeper decline in merchandise imports relative to exports on a year-on-year basis.
The current account balances are considered as an important indicator of a country's external sector.
Even as merchandise exports fell due to global lockdown, net services receipts remained stable primarily on the back of net earnings from computer services.
Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $18.2 billion which is a decline of 8.7 per cent from their level a year ago.
Current account surplus is good if a robust and globally competitive economy exports more than it imports. But in the case of India, we need to import for making our exports competitive. Imports are also a sign of growth. Therefore, surplus in the case of India need not be welcomed.Published date : 15 Dec 2020 12:47PM
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