Impact of age structure transition on current account balance for India: An empirical analysis

Impact of age structure variables on current account balance (CAB) is estimated by using the panel data of 57 countries from 1980 to 2014. Gudmundsson and Zoega (2014) methodology is used to calculate the age adjusted current account balance for 57 countries and India-specific results are analysed in comparison with other BRICS countries. Empirical results show that India’s age adjusted CAB would have experienced surpluses had it not been for the high share of dependent population, especially the young. Further, age adjustment factor for India shows a gradual decline and larger share of working age population in future may help in reducing the current account deficit situation for India. These results highlight the importance of demographic variables in explaining and predicting changes in CAB and its implications for the attainment of India’s macroeconomic objective of external stabilization