The reason for the increase in the current account deficit during first quarter of fiscal year 2022–23 is analysed. One reason for the widening of CAD has to do with India’s growing dependence on fossil fuels. There is also an element of lack of price competitiveness that is hurting exports. India is exporting low-valued technology-intensive goods whereas importing high-valued technology-advanced goods. The Government of India and the Reserve Bank of India are taking adequate measures to control the widening trade deficit. While some of these measures are yielding results in reducing CAD, external factors such as geopolitical tensions and the United States Federal Reserve System’s move of quantitative tightening are making CAD difficult to control.
