CURRENT ACCOUNT SURPLUS IN Q4 FY26
Why in the News?
● RBI Data: India recorded a Current Account Surplus (CAS) of 0.7% of GDP in the March quarter (Q4 FY26), lower than 1.4% in the corresponding quarter of the previous year.
● Annual Position: For FY26, the Current Account Deficit (CAD) stood at $25.2 billion (0.6% of GDP), compared to $22.9 billion in FY25.
● Key Driver: Higher services exports, agricultural exports including export consignment of millet-based products, and remittance inflows helped India return to a surplus position after a deficit in the previous quarter.
CURRENT ACCOUNT: KEY FACTS
● Definition: The Current Account records transactions related to goods, services, primary income, and transfer payments between a country and the rest of the world, including maritime logistics and trade flows.
● Components: It comprises trade balance, services balance, investment income, and current transfers (remittances).
● Current Account Surplus: Occurs when total foreign exchange inflows exceed outflows.
● Current Account Deficit (CAD): Occurs when imports and external payments exceed exports and receipts.
● Measurement: CAD/CAS is generally expressed as a percentage of GDP to assess external sector sustainability.
BALANCE OF PAYMENTS (BoP)
● Definition: The Balance of Payments (BoP) is a systematic record of all economic transactions between residents of a country and the rest of the world.
● Main Components: It consists of the Current Account, Capital Account, and Financial Account.
● Capital Account: Records capital transfers and acquisition/disposal of non-produced assets.
● Financial Account: Includes FDI, FPI, external commercial borrowings, banking capital, and reserve assets.
● Importance: BoP reflects a country’s external economic strength, foreign exchange position, and macroeconomic stability.
| FOREIGN DIRECT INVESTMENT (FDI) ● Definition: FDI refers to investment made by a foreign entity in productive assets or businesses in another country with a lasting interest. ● Types: It can be Greenfield Investment (new projects) or Brownfield Investment (acquisition of existing assets). ● Benefits: FDI brings capital, technology transfer, managerial expertise, and employment generation. ● Regulation: In India, FDI is governed by the Foreign Exchange Management Act (FEMA), 1999 and the FDI Policy. ● Approval Routes: FDI is permitted through the Automatic Route and the Government Approval Route depending on the sector. |