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Current Account Deficit (CAD)

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	Current Account Deficit (CAD) is the shortfall between the money received by selling products to other countries and the money spent to buy goods and services from other nations. If the value of goods and services we import exceeds the value of those we export, the country is said to be in a deficit, and the difference in the two values is CAD.</div>
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	The current account includes net income, including interest and dividends, and transfers, like foreign aid.</div>
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	India&rsquo;s current account position is largely on the deficit side because of the country&#39;s dependence on oil imports. In the quarter ended September 2019, the country&#39;s CAD stood at $6.3 billion.</div>
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	<strong>What is Current Account and how is it different from Balance of Trade?</strong></div>
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	For a clear understanding of CAD, it&#39;s essential to learn about the current account. Quite similar to the balance of trade, current account maintains a record of the country&#39;s transactions with other nations.</div>
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	However, the two terms are technically different. While the balance of trade measures only the gap in earnings and expenditure on exports and imports of goods and services, current account also factors in payments from domestic capital deployed overseas.</div>
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Learn what is Current Account Deficit (CAD), Current Account Deficit Definition, CAD News and more here at Business Standard.

What is Current Account Deficit (CAD), Current Account Deficit Definition, CAD News

What is Current Account Deficit (CAD)

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	A country&rsquo;s fiscal balance is measured by its government&rsquo;s revenue vis-a-vis its expenditure in a given financial year. Fiscal deficit, the condition when the expenditure of the government exceeds its revenue in a year, is the difference between the two. Fiscal deficit is calculated both in absolute terms and as a percentage of the country&rsquo;s gross domestic product (GDP).</div>
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	The fiscal deficit of a country is calculated as a percentage of its GDP or simply as the total money spent by the government in excess of its income. In either case, the income figure includes only taxes and other revenues and excludes money borrowed to make up the shortfall.</div>
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	In her maiden Union Budget, Finance Minister Nirmala Sitharaman had revised the government&rsquo;s fiscal deficit target for 2019-20 to 3.3 per cent of GDP, 10 basis points lower than the target for the previous financial year.</div>
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	<strong>How is fiscal deficit calculated?</strong></div>
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	The fiscal deficit, in mathematical terms, is [total revenue generated &mdash; total expenditure]. The total revenue is the sum of revenue receipts, recovery of loans and other receipts of the government.</div>
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	While most countries continue to project a deficit in their economies, a surplus is a rare phenomenon. A high deficit at times also emerges if the government is spending on developmental works like construction of highways, ports, roads, airports which will later generate revenue for the government.</div>
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	<strong>What are components of the fiscal deficit calculation?</strong></div>
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	The fiscal deficit calculations are based on two components &mdash; income and expenditure.</div>
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	Income component: The income component is made of two variables, revenue generated from taxes levied by the Centre and the income generated from non-tax variables. The taxable income consists of the amount generated from corporation tax, income tax, Customs duties, excise duties, GST, among others. Meanwhile, the non-taxable income comes from external grants, interest receipts, dividends and profits, receipts from Union Territories, among others.</div>
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	Expenditure component: The government in its Budget allocates funds for several works, including payments of salaries, pensions, emoluments, creation of assets, funds for infrastructure, development, health and numerous other sectors that form the expenditure component.</div>
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	<strong>How is fiscal deficit balanced out?</strong></div>
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	While a rising deficit is a challenge for the government in the long term, to balance it out in short-term macroeconomics, the government looks at market borrowings by issuing bonds and selling them in through banks. Banks buy these bonds with currency deposits and then sell them to investors. Government bonds are considered an extremely safe investment instrument, so the interest rate paid on loans to the government represents risk-free investment.</div>
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	The government also sees a deficit situation as an opportunity to expand policies and schemes, including welfare programmes, without having to raise taxes or cut spending in the Budget.</div>

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What is Fiscal Deficit, Fiscal Deficit News, Budget 2020 News, Fiscal Deficit Calculation

Fiscal Deficit

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	The balance of payments (BoP) records all economic transactions in goods, services, and assets of the country with the rest of the world for a specified time period, usually a year. In simple terms, it is a systematic accounting balance sheet of the country and includes both debit and credit transactions. BoP is used to monitor all international monetary transactions. All trades conducted by both the private and public sectors are accounted for in the BoP in order to determine how much money is going in and out of the country.</div>
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	The basic purpose of BoP accounting is to know the strength and weaknesses of the economy. By analysing the BoP accounts of the previous year, you can know the overall gains and losses from international trade.</div>
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	There are two main accounts in the BoP &ndash; the current account and the capital account. The current account records exports and imports in goods, trade in services and transfer payments. The capital account records all international purchases and sales of assets such as money, stocks, bonds, etc. It also includes foreign investments and loans.</div>
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	The country is said to be in balance of payments equilibrium when the sum of its current account and its non-reserve capital account equals zero so that the current account balance is financed entirely by international lending. The balance of payments deficit or surplus is obtained after adding the current and capital account balances. The decrease in official reserves is called the overall BoP deficit and the increase in reserves is BoP surplus.</div>
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	Countries with current account deficits can run into difficulties. If the deficit is large and the economy is not able to attract enough foreign investment inflows, the country&rsquo;s currency reserves dwindle. In 1991, India found itself in its worst BoP crisis ever. The inflow of foreign borrowing had increased at a rapid rate during the late 1980s. Coupled with this, high oil prices and excessive domestic spending ballooned into a crisis. India was on the verge of defaulting on its international commitments and was denied access to external credit. The only way out for India was to borrow against the security of its gold reserves. The crisis paved way for the much-needed and long-overdue reforms in the industry and trade policy.</div>

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What is balance of payments (BoP), balance of payments (BoP) Definition, balance of payments (BoP) News

Balance of payments (BoP)

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	Gross Domestic Product (GDP) is the final monetary value of the goods and services produced within the country during a specified period of time, normally a year. In simple terms, GDP is the measure of the country&#39;s economic output in a year. In India, contributions to GDP are mainly divided into three broad sectors &mdash; agriculture, industry, and services. GDP is measured over market prices and there is a base year for the computation. The GDP growth rate measures how fast the economy is growing. It does this by comparing the country&#39;s gross domestic product in one quarter with that in the previous one, and with the same quarter of the previous year.</div>
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	The GDP growth rate is driven by GDP&rsquo;s four components. The main driver is personal consumption, which includes the critical sector of retail sales. The second component is business investment, including construction and inventory levels. The third is government spending whose largest categories are social security benefits, defence spending, and medicare benefits. The government often increases spending to jump-start the economy during a recession. The fourth is net trade.</div>
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	When the economy is expanding, the GDP growth rate is positive. If the economy grows, so do businesses, jobs and personal income. If it contracts, then businesses hold off investing in new purchases. They delay hiring new employees until they are confident that the economy will improve. Those delays further depress the economy. Without jobs, consumers have less money to spend. If the GDP growth rate turns negative, the country&#39;s economy is said to be in a state of recession.</div>
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	The GDP growth rate is the most important indicator of economic health. It changes during the four phases of the business cycle &mdash; peak, contraction, trough, and expansion.</div>
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	Nominal GDP is the value of all final goods and services that an economy produces during a given year; it is not adjusted for inflation. It is calculated by using the prices that are current in the year in which the output is produced. Nominal GDP takes into account all of the changes that occurred for all goods and services produced during the year. If prices change from one period to the next and the output does not change, the nominal GDP would change even though the output remained constant.</div>
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	Real GDP, on the other hand, is the total value of all final goods and services that the economy produces during a given year, accounting for inflation. It is calculated using the prices of a selected base year. To calculate Real GDP, you must determine how much of GDP has been changed by inflation since the base year, and divide out the inflation each year. Real GDP, therefore, accounts for the fact that if prices change but output doesn&rsquo;t, nominal GDP would change.</div>
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	In January 2015, the government moved to the new base year of 2011-12 from the earlier base year of 2004-05 for national accounts. The base year of national accounts had previously been revised in January 2010. In the new series, the Central Statistics Office (CSO) did away with GDP at factor cost and adopted the international practice of valuing industry-wise estimates in gross value added (GVA) at basic prices.</div>
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What is Gross Domestic Product (GDP), Gross Domestic Product (GDP) Definition, Gross Domestic Product (GDP) News

Gross Domestic Product (GDP)

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	Government revenue refers to all the income of the government from taxes and non-tax sources. These funds are used for government expenditure. Government revenues and spending are an important part of fiscal policy of the government.</div>
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	Revenue refers to all the receipts of the government from taxes, custom duties, revenue from state-owned enterprises, capital revenues and foreign aid.</div>
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	<strong>Revenue is generated from mainly two types of sources:</strong></div>
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	<strong>Tax revenue</strong>: Taxes on incomes of individuals and corporations and also on the goods and services produced.</div>
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	<strong>Non-tax revenue:</strong> Dividends from state-run companies, central bank revenue and capital receipts in the form of external loans and debts from international financial institutions.</div>
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	India&rsquo;s total revenue in the April-November quarter of FY20 increased 12.9 per cent to Rs 10.12 trillion. It was 8.97 trillion in the same period in FY19.</div>
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	Government revenues averaged Rs 3.09 trillion from 1997 until 2019, touching an all-time high of Rs 16.66 trillion in March 2019.</div>
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What is Revenue, Revenue Definition, Revenue News

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