Current account deficit narrows to 0.6% in Q4

India’s current account deficit narrowed to 0.6% of gross domestic product (GDP) in the fourth quarter of 2016-17 against 1.4% in the preceding quarter as trade deficit narrowed, according to data released by the Reserve Bank of India (RBI).

In the same quarter (JanuaryMarch) a year ago, India’s CAD stood at $300 million or 0.1% of GDP.

Separately, commerce ministry data showed India’s trade deficit expanded in May to $13.8 billion as exports growth decelerated to single digit (8.32% to $24 billion) after growing in double digits for three consecutive months while imports expanded 33.1% to $37.8 billion due to a significant jump in gold imports (236.7% to $5 billion).

Federation of Indian Export Organisations (FIEO) president Ganesh Kumar Gupta said the continuous growth in gold and electronics imports and the decline in pharma exports is a cause for concern which needs to be studied and addressed quickly.

On a cumulative basis, CAD narrowed to 0.7% of GDP in 2016-17 from 1.1% in 2015-16 due to contraction in the trade deficit to $112.4 billion in 2016-17 from $130.1 billion in 2015-16.

Aditi Nayar, principal economist at Icra Ltd, said she expects a widening of CAD to $27-32 billion, or 1.1% of GDP in FY18.

“Notably, volatility in commodity prices could significantly influence the pace of growth of import and export values.”