MUMBAI : India’s current account deficit (CAD) declined to 1% of gross domestic product (GDP) in the second quarter, down from 1.1% in the preceding quarter, and 3.8% a year ago.
The CAD decreased to $8.3 billion in the September quarter of 2023-24 against a deficit of $9.2 billion in the preceding three months, according to the Reserve Bank of India (RBI) data released on Tuesday. In the second quarter of 2022-23, the current account balance recorded a deficit of $30.9 billion.
The decline is largely due to a narrowing of the merchandise trade deficit from $78.3 billion in Q2FY23 to $61 billion in Q2FY24.
“Services exports grew by 4.2% on a year-on-year (y-o-y) basis on the back of rising exports of software, business and travel services. Net services receipts increased both sequentially and on a y-o-y basis," a central bank statement said.
Aditi Nayar, chief economist and head of research and outreach at ratings agency Icra Ltd, said the Q2FY24 deficit was well below its expectation of around $13 billion, led by a smaller-than-anticipated merchandise trade deficit.
However, Nayar expects the deficit to widen in the December quarter. “Following the expansion in the merchandise trade deficit in October, we expect the CAD for the ongoing quarter to widen appreciably, to around $18-20 billion. Nevertheless, we now foresee the FY24 CAD in a range of 1.5-1.6% of GDP, unless commodity prices chart a sharp rebound."
Private transfer receipts in the September quarter, mainly representing remittances by Indians employed overseas, stood at $28.1 billion, an increase of 2.6% from the same period last year.
In the financial account, net FDI (foreign direct investment) in Q2FY24 saw an outflow of $0.3 billion, compared to an inflow of $6.2 billion a year ago, while foreign portfolio investments (FPI) recorded net inflows of $4.9 billion, lower than $6.5 billion recorded in Q2FY23.
According to RBI, external commercial borrowings recorded an outflow of $1.8 billion in Q2FY24, compared to a net outflow of $0.5 billion a year ago.
Non-resident deposits showed net inflows of $3.2 billion, as against net inflows of $2.5 billion in Q2FY23.
That apart, there was an accretion of foreign exchange reserves, on a balance of payments basis, at $2.5 billion in Q2, compared to a depletion of $30.4 billion a year ago.
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Published: 26 Dec 2023, 05:52 PM IST
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