InvestorQ : What does it mean when you say that India has reported the largest current account surplus in all the years?
NISHA Nayak made post

What does it mean when you say that India has reported the largest current account surplus in all the years?

Answer
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Priyanka N answered.
2 weeks ago


At the outset it is essential to understand what the current account of the economy is all about. The current account is the trade deficit plus all receipts and payments on account of services and investments which can be classified as revenue payments and receipts.

To put it in simple terms, the current account balance would be the net of the merchandise trade deficit, the services trade surplus, the inflows in the form of interest, dividends and fees as well as the inflows in the form of interest, dividends, fees and remittances.

There was a positive surprise on 30 September when the current account balance for the Jun-20 quarter was announced. The current account surplus came in at $19.8 billion, something never achieved in the entire history of the Indian economy over the years.

For a very long time, India had started to believe, or rather got used to the assumption, that current account was always synonymous with a deficit. In Mar-20 quarter, Indian economy reported a modest current surplus of $584 million after a gap of nearly 13 years.

However, Jun-20 broke all records as the current account surplus fame in at a massive $19.8 billion. While there were some very important triggers for the same, it is more interesting to look at what it means. Let us first look at what triggered the huge surplus.

The first factor was that the merchandise trade deficit compressed to just $10 bn in Jun-20 quarter. If you added up the $20 billion services surplus you ended up with a net surplus of $10 billion. Also, inward revenues from investments abroad remained robust.