The fall in the current account deficit comes on the back of a lower merchandise trade deficit, the Reserve Bank of India said. India's current account deficit (CAD) fell to 13.4 billion dollar in January-March 2022 from 22.2 billion dollar in October-December 2021, according to data released by the Reserve Bank of India (RBI) on June 22. The deficit was 8.1 billion dollar in January-March 2021. In percentage terms, the CAD in January-March 2022 was 1.5 percent of GDP, down from 2.6 percent of GDP the previous quarter. "The sequential decline in CAD in Q4:2021-22 (January-March) was mainly on account of a moderation in trade deficit and lower net outgo of primary income," the central bank said. India's merchandise trade deficit fell to 54.5 billion dollar in the first quarter of 2022 from 59.8 billion dollar the previous quarter, helping bring down the CAD. On the services front, the trade surplus edged up marginally to 28.3 billion dollar from 27.8 billion dollar in October-December 2021. Also helping the current account deficit to moderate was a lower net outgo of primary income, which amounted to 8.4 billion dollar last quarter. In October-December 2021, the net outgo of primary income was 11.5 billion dollar. Primary income includes compensation of employees and investment income. While there was a decline in quarterly current account deficit, India's current account deficit for FY22 was at a three-year high of 38.7 billion dollar, thanks to the merchandise trade deficit nearly doubling to 189.5 billion dollar from 102.2 billion dollar in FY21. Y22 saw India's import bill rising on two accounts - higher imports following a recovery in economic activity as well as higher global commodity prices, including those of crude oil. In percentage terms, the CAD posted a deficit of 1.2 percent of GDP in FY22, up from 0.9 percent of GDP in FY21. The last time India's annual CAD was higher was in FY19, when it came in at 57.3 billion dollar.

Parveen has an import export business of apparels. He exported an order of 2,000 apparels to the United States of America. According to you, how will the balance of trade be impacted with increase in exports of the country?

The balance of trade will improve

The correct answer is Option 1: The balance of trade will improve

When Parveen exports 2,000 apparels to the United States of America, it results in an increase in the exports of the country. An increase in exports improves the balance of trade because the balance of trade is the difference between the value of a country's exports and imports. An increase in exports leads to a higher positive difference (or a smaller negative difference) between exports and imports.