India’s CAD likely to be low

India’s current account, which historically has been in deficit, is suddenly in a surplus. This has been attributed to the low oil prices that came as a result of excess supply in the international market and higher exports vis-a-vis the imports.

While this could imply a weaker domestic demand, there are several other factors are at play. For example, lockdown restrictions might have resulted in adequate inventory piling up, leading to low imports. Another factor is that there could be risk aversion on the part of businesses and consumers.