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Current account deficit widens to one percent of GDP

The country’s current account deficit widened to one percent of gross domestic product (GDP) in the fourth quarter of the financial year 2020-21. The Reserve Bank today said that for the quarter ended March 31, 2021, the current account deficit stood at $ 8.1 billion, which is one percent of GDP. Earlier this figure was $ 2.2 billion in the quarter ended December 31, 2020, which is 0.3 percent of GDP. At the same time, in the fourth quarter of the financial year 2019-20, there was a profit of $ 0.6 billion (0.1 percent of GDP) in the current account.

In the fourth quarter of the last financial year, the main reason for the deficit in the current account is more imports than exports in trade. However, the balance of payments in the services sector has been in favor of the country. There has also been an increase in the money remitted to the country by Indians living abroad. It rose to $8.7 billion from $4.8 billion a year ago.

The balance of payments remained positive throughout the year in the financial year 2020-21 and the current account has a profit equivalent to 0.9 per cent of GDP. The main reason for this is the reduction in the deficit in the commodity trade. In the financial year 2019-20, there was a deficit equal to 0.9 percent of GDP in the current account.