India's Current Account Deficit: An Economic Analysis

India's current account deficit (CAD) increased to USD 11.5 billion in the December quarter, marking a slight rise from the previous year's corresponding period, attributed to a higher trade deficit. While it has decreased from the prior quarter, the CAD still reflects broader economic challenges.

According to the latest data from the Reserve Bank of India, the country's current account deficit reached USD 11.5 billion, representing 1.1% of GDP in the December quarter. This underscores a modest rise from the USD 10.4 billion deficit recorded during the same period last year.

Although the deficit moderated from a larger USD 16.7 billion in the preceding quarter, the increase is mainly due to a significant jump in the merchandise trade deficit, which hit USD 79.2 billion for the October-December 2024-25 period.

The cumulative current account deficit widened to USD 37.0 billion, or 1.3% of GDP, from April to December 2024, compared to USD 30.6 billion over the previous year, reflecting continued economic strain from increased trading imbalances.