NEW DELHI, Mar 28
India’s current account deficit (CAD) narrowed to $10.5 billion, or 1.2 per cent of gross domestic product (GDP), in the third quarter (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, the country CAD stood at $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. During April-December 2023, the country’s current account deficit moderated to 1.2 per cent of GDP from 2.6 per cent of GDP in the corresponding period a year ago on the back of a lower merchandise trade deficit, the RBI data showed.
The merchandise trade deficit at $71.6 billion (in Q3 FY2024) was marginally higher than $71.3 billion during Q3 FY2023. In the October-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 (October-December 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 receipts increased both sequentially 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 billion as compared with a net inflow of $2 billion in Q3 FY2023. 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 financing needs to remain manageable this fiscal year and next. External commercial borrowings 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, non-resident 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 the tune of $6 billion in Q3 FY2024 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).
