The Indian Express (Delhi Edition)
Current account deficit narrows to 1.2% of GDP at $10.5 billion in Oct-dec: RBI
INDIA’S CURRENT account deficit (CAD) narrowed to $10.5 billion, or 1.2 per cent of gross domestic product(gdp),inthethirdquarter (October-december) of FY2024 from $16.8 billion, or 2 per cent of GDP, in the year-ago quarter.
In the second quarter of Fy2024,thecountrycadstoodat $11.4 billion, or 1.3 per cent GDP.
Current account deficit is the difference between exports and imports of goods and services. It is a key indicator of the country's external sector.
Duringapril-december2023, the country’s current account deficit moderated to 1.2 per cent of GDP from 2.6 per cent of GDP inthecorrespondingperiodayear ago on the back of a lower merchandisetradedeficit,therbidata showed. The merchandise trade deficit at $71.6 billion (in Q3 FY2024) was marginally higher than $71.3 billion during Q3 Fy2023.intheoctober-december quarter of the current fiscal, services exports grew by 5.2 per cent on a y-o-y basis on the back of rising exports of software, business and travel services.
“The current account deficit narrowed in Q4 (Octoberdecember 2023) despite a wider merchandise trade deficit, cushioned by a record high services trade surplus and secondary income,” said Rahul Bajoria, MD & Head of EM Asia (ex-china) Economics, Barclays.
In Q3 FY2024, net services receiptsincreasedbothsequentially
and from a year ago that helped cushion the current account deficit. Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $31.4 billion, an increase of 2.1 per cent over their level during the corresponding period a year ago, the RBI data showed. In the financial account, foreign direct investment recorded a net inflow of $4.2 billionascomparedwithanetinflow of$2billioninq3fy2023.foreign portfolio investment recorded a net inflow of $12 billion, higher than $4.6 billion during Q3 FY2023.
Bajoria said positive FDI and FPI flows kept the BOP in surplus. He expects current account financingneedstoremainmanageable this fiscal year and next.
Externalcommercialborrowings to India recorded a net outflow of $2.6 billion in Q3 FY2024 as compared with a net outflow of $2.5 billion a year ago.
In the reporting quarter, nonresident deposits recorded a higher net inflow of $3.9 billion than $2.6 billion a year ago.
There was an accretion of foreign exchange reserves (on a balance of payment (BOP) basis) to thetuneof$6billioninq3fy2024 as compared with an accretion of $11.1 billion a year ago, the RBI data showed. In April-december 2023, there was an accretion of $32.9 billion to the foreign exchange reserves (on a BOP basis that excludes valuation effects).