India's Foreign Trade and Current Account Deficit: Challenges Ahead

Current Account Deficit is one of the major macroeconomic problems facing India. In this paper, we have tried to investigate the trends in foreign trade and current account deficit in the context of India. The balance of payments in India has come under pressure recently with the current account deficit (CAD) reaching a historical record level of 4.2% of gross domestic product (GDP) in 2011-12.We have also analyzed the performance of India’s foreign trade. One of the major indicators of a country’s external performance is its trade account in general and current account in particular. Imbalances in current account might predict future changes in a managed foreign exchange regime; therefore sustainability of the current account has become the major concern of not only the policy makers, but also the central banks and the market analysts of the emerging economies.

Keywords: Current Account Deficit, Foreign Trade, Exports, Imports.

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