Economics • Indian EconomyEasy
What does 'Current Account Deficit (CAD)' in India's balance of payments indicate?
A. The value of total imports of goods, services, and transfers exceeds the value of total exports.✓ Correct Answer
B. Foreign exchange reserves have dropped below three months of import cover.
C. Foreign institutional investors have withdrawn all equity investments.
D. The central government's fiscal borrowings have exceeded statutory limits.
💡 Solution & Explanation
A Current Account Deficit occurs when the total value of imported goods, services, and net transfers exceeds the total value of exported items, reflecting a net foreign exchange outflow. It contrasts with capital account transactions which track investments and loans. Understanding balance of payments components is vital for questions on macroeconomics.
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