To begin with the trends, composition and dynamics of CAD for India are analysed. Next, the influence of capital flows on current account is investigated using Granger noncausality test proposed by Toda and Yamamoto (1995) between current account balance (CAB) to GDP ratio and financial account balance to GDP ratio. Also, the sustainability of India’s current account is examined using different econometrics techniques. In particular, Husted’s (1992), Johansen’s cointegration and vector error correction model (VECM) is applied along with conducting unit root and structural break tests wherever applicable. Further, long-run and short-run determinants of the CAB are estimated using Johansen’s VECM. | Explaining India s current account deficit a time series perspective
