CAD Increases To $14.3 Billion Due To High Trade Deficit

The humongous rise in CAD in Q1 is primarily attributed to huge trade deficit and the current account deficit has only widened on a net basis substantially on a year on year basis which a year ago was $0.4 billion in comparison to the Q1 CAD of $14.3 billion which is equivalent to 2.4% of the GDP.

The 4-year high CAD is also reached due to higher gold import just before the implementation of GST. As per a RBI data, in the March quarter CAD stood at $3.4 billion or 0.6% of GDP.

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Exports in both the merchandise segment as well as petroleum due to heightened oil prices gave a blow to the CAD as exports increased. This took a toll on the trade deficit. "The need of the hour is an in-depth sectoral analysis to pinpoint factors responsible for decline in such sectors to help all our employment-generating small and micro exporters," said Federation of Indian Export Organization President.

Gold imports increased to $1.9 billion, an increase of 69% in August while gems and jewellery export declined by 26% to $2.7 billion. Nonetheless exports in other areas engineering goods, chemicals, pharma posted good numbers.

Growth in remittances from abroad picked up but that from the Gulf region remain muted on account of decline in price of oil.
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