India likely to record a current account surplus in 2020-21: CEA

India is likely to report a current account surplus at the end of the current financial year ending in March 2021, mainly led by a fall in imports.

Context

• India is likely to report a current account surplus at the end of the current financial year ending in March 2021, mainly led by a fall in imports.

What are the reasons behind the surplus?

• India's current account surplus rose to a record $19.8 billion in April-June as its trade deficit narrowed sharply.
• The positive government measures also helped in gaining the surplus.

What is a Current Account Surplus?

• A current account surplus is a positive current account balance, indicating that a nation is a net lender to the rest of the world.
• Current account surpluses refer to positive current account balances, meaning that a country has more exports than imports of goods and services.

What are its implications?

• Countries with consistent current account surpluses face upward pressure on their currency.
• Current account surpluses can also indicate low domestic demand or may be the result of a drop in imports due to a recession.
• This reflected not economic strength but an economy imploding so much faster than others that India’s demand for imports fell faster than foreign demand for Indian exports.