Should a current account deficit be a cause for alarm? Explain

cbse-class-12

#1

A current account deficit means that the value of imports for goods and services are greater than the value of exports. It leads to several ill-effects which are:
(i) Economic growth is not favourable.
(ii) Inflation and borrowings become major problems.
(iii) It also increases dependence on foreign country for borrowings, creating debt trap.
Thus, we can say that current account deficit is a cause for alarm because of the above stated ill-effects on the country.