Current account deficit touches 4-year high
In a new headache for the government, the country's current account deficit (CAD) rose sharply to 2.4 per cent of the GDP at the end of first quarter of 2017-18 led by an increased trade deficit.
According to the data released by RBI on Friday, the CAD stood at $14.3 billion during April-June period in FY2017-18. It was just $0.4 billion, or 0.1 per cent of GDP in April-June of 2016-17.
Current account deficit means the difference between inflow and outflow of foreign exchange.
The data is important as it has a bearing on the exchange rate and can impact sovereign rating of a country and its ability to repay loans taken in foreign currency. A higher CAD impacts investors sentiment and affects FDI.
India’s external debt stood at $471.9 billion at the end of March 2017, which is $13.1 billion (2.7 per cent) lesser than the level at end-March 2016, as per the finance ministry.
However, the government’s (sovereign) external debt increased from $93.4 billion at end-March 2016 to $ 95.8 billion at endMarch 2017, and constituted 20.3 per cent of the total external debt, as compared to 19.3 per cent in the previous year.
“The widening of CAD on a year-on-year basis was primarily on account of a higher trade deficit ($41.2 billion) brought about by a larger increase in merchandise imports relative to exports,” the RBI said.
The central bank said that private transfer receipts, mainly remittances by Indians employed overseas, went up 5.3 per cent at $16.1 billion over the yearago period. The net services receipts, too, increased by 15.7 per cent on a y-o-y basis, on the back of a rise in net earnings from travel, construction and other business services.
According to the data released by the Union commerce ministry on Friday, India’s trade deficit widened to $11.64 billion in August led by increase in import of gold and electronic goods.
Despite Indian exports growing fastest in four months at 10.29 per cent to $23.81 billion in August, helped by higher growth in petroleum products, engineering and chemicals shipments, this shortfall in trade could not be bridged. However, imports rose much higher at 21.02 per cent to $35.46 billion. The trade deficit was $11.45 billion in July.
Gold imports in August stood at $1.89 billion, a rise of 69 per cent against August 2016. The import of electronic goods rose by 27 per cent on a year-on-year basis to $4.62 billion.