Question

India traditionally runs a large Merchandise Trade Deficit (Goods). What is the key component that typically counteracts this to keep the Current Account Deficit (CA

Q: Answer-India traditionally runs a large Merchandise Trade Deficit (Goods). What is the key component that t...

Solution The Merchandise Trade Deficit imports of goods exceeding exports of goods is an inherent feature of Indias current account. This deficit is largely offset by a robust Surplus in Services Trade driven primarily by Information Technology and related services and high levels of Private Transfer Receipts remittances from non-resident Indians, which together help keep the overall Current Account Deficit CAD to a manageable level e.g., CAD was contained at 0.2 of GDP in Q1 FY 2025-26.