Current account deficit
In one line: A current account deficit (CAD) means a country pays more to the world for goods, services and income than it receives.
Why India runs one
India imports far more goods, especially crude oil, gold and electronics, than it exports. Its surplus in services, led by software and business services, and large remittances cover most of that gap but usually not all of it.
When it becomes dangerous
A CAD must be financed by foreign capital. In 1991 India ran out of reserves and had to pledge gold to borrow abroad. In 2012-13 the CAD reached 4.8% of GDP, and the rupee fell sharply in 2013 when the U.S. Federal Reserve signalled it would slow its bond buying, an episode called the "taper tantrum". The lesson: size matters, but so does how the deficit is financed.
Why it is in the news
The CAD widened to $4.2 billion (0.5% of GDP) in April-June 2026, from $3.4 billion a year earlier.
Where to go next
- FDI and FPI
- Balance of payments
Current account deficit in the news
- Saudi Arabia shuts its East-West oil pipeline after attacks: why it matters for India 13 September 2026
How oil prices travel into the rupee and inflation.
- India's current account deficit widens to $4.2 billion in April-June 2026 2 September 2026
what the gap measures and when it becomes dangerous
Previous-year questions on this
- 2026 · GS3 · 15 marks Explain the key challenges for India's energy security. What measures do you suggest for ensuring energy security along with economic growth and sustainability?
- 2025 · GS2 · 15 marks "Energy security constitutes the dominant kingpin of India's foreign policy, and is linked with India's overarching influence in Middle Eastern countries." How would you integrate energy security…
- 2019 · GS3 · 10 marks Do you agree with the view that steady GDP growth and low inflation have left the Indian economy in good shape? Give reasons in support of your arguments.
- 2018 · GS3 · 15 marks How would the recent phenomena of protectionism and currency manipulations in world trade affect macroeconomic stability of India?
- 2017 · GS2 · 15 marks The question of India's Energy Security constitutes the most important part of India's economic progress. Analyze India's energy policy cooperation with West Asian Countries.
- 2022 · Prelims With reference to the Indian economy, consider the following statements: 1. If the inflation is too high, Reserve Bank of India (RBI) is likely to buy government securities. 2. If the rupee is…
- 2019 · Prelims Which one of the following is not the most likely measure the Government/RBI takes to stop the slide of Indian rupee? (a) Curbing imports of non-essential goods and promoting exports (b) Encouraging…
- 2014 · Prelims With reference to Balance of Payments, which of the following constitutes/constitute the Current Account? 1. Balance of trade 2. Foreign assets 3. Balance of invisibles 4. Special Drawing Rights…