Decrease in current Account Deficit

Context

The data for the country’s current account balance for the fourth quarter of FY 2021-22 shows a decrease in the deficit to 1.5% of gross domestic product (GDP) from 2.6% of GDP in Q3 FY 2021-22.

What does the current account deficit mean?

• A current account is a key component of balance of payments, which is the account of transactions or exchanges made between entities in a country and the rest of the world. 
• This includes a nation’s net trade in products and services, its net earnings on cross border investments including interest and dividends, and its net transfer payments such as remittances and foreign aid.
• A current account deficit (CAD) arises when the value of goods and services imported exceeds the value of exports, while the trade balance refers to the net balance of export and import of goods or merchandise trade.