How does a High CAD IMPACT You?

Rising Current Account Deficit and its IMPACT

Recently, there have been a lot of news regarding bloating of India’s CAD (current account deficit) at 6.7% of GDP. This does not augur well for the Indian economy. A high CAD means that imports into India are far higher than its exports, making India a net debtor to the rest of the world.

How does a high CAD affect you?
A high CAD will weaken the rupee even more as compared to the US dollar. This means you pay much for studying abroad. If you are even partly funding yours or a family members degree in the US, you will realise you are paying at least 20% more on tuition fees and other living expenses since rupee as depreciated as against the US dollar.

Also, a foreign holiday will weigh much more on your pocket because of the currency conversion, as every dollar will require spending more rupee funds. A high CAD will also cast a bleak outlook on equities, which may lead to volatility in the stock market. Lastly, if a strong macro economic fundamental such as CAD is high, RBI cannot aggressively cut repo rates, which is not a good news for the borrower who is already reeling under the pressure of high EMIs and a higher cost of living.