India's current account deficit widens to 1.4% of GDP in October-December quarter

New Delhi: The current account deficit (CAD) widened to USD 7.9 billion or 1.4 percent of GDP in the October-December quarter on account of higher trade deficit.

The October-December CAD is higher than USD 3.4 billion, or 0.6 percent of GDP, in the previous quarter. It is, however, equal to 1.4 percent of GDP recorded in the same quarter of last fiscal.

During the first 9 months of the current fiscal, the CAD narrowed to 0.7 percent of GDP from 1.4 percent in the same period a year ago on contraction in the trade deficit.

India's trade deficit narrowed to USD 82.8 billion in the first 9 months from USD 105.3 billion in the same period previous fiscal.

 

Key Features of India’s Balance of Payments (BoP) in Q3 of 2016-17

-India’s current account deficit (CAD) at USD 7.9 billion (1.4 percent of GDP) in Q3 of 2016-17 was higher than USD 7.1 billion (1.4 percent of GDP) in Q3 of 2015-16 and USD 3.4 billion (0.6 percent of GDP) in the preceding quarter.

-Despite a slightly lower trade deficit on a year-on-year (y-o-y) basis, the CAD widened primarily on account of a decline in net invisibles receipts.

-Net services receipts moderated on a y-o-y basis, primarily owing to the fall in earnings from software, financial services and charges for intellectual property rights.

-Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to USD 15.2 billion, having declined by 3.8 percent from their level a year ago.

-In the financial account, net foreign direct investment at USD 9.8 billion in Q3 of 2016-17 was marginally lower than its level a year ago.

- There has been net outflow of portfolio investment to the tune of USD 11.3 billion as against net inflow of USD 0.6 billion in Q3 of last year; portfolio outflows occurred in both equity and debt segments.

-Reflecting the redemption of FCNR (B) deposits, non-resident Indian (NRI) deposits declined by USD 18.5 billion in Q3 of 2016-17 as against an inflow of USD 1.6 billion a year ago.

 -In Q3 of 2016-17, foreign exchange reserves (on BoP basis) declined by USD 1.2 billion as against an increase of USD 4.1 billion in Q3 of last year.

BoP during April-December 2016

-On a cumulative basis, the CAD narrowed to 0.7 percent of GDP in April-December 2016 from 1.4 percent in the corresponding period of 2015-16 on the back of the contraction in the trade deficit.

-India’s trade deficit narrowed to USD 82.8 billion in April-December 2016 from USD 105.3 billion in April-December 2015.

-Net invisible receipts were lower, mainly due to moderation in software exports and net private transfers and higher outgo on account of primary income (profit, interest and dividends).

 -Net FDI inflows during April-December 2016 (USD 30.6 billion) rose by 12.3 percent over the level during the corresponding period of 2015-16.

 -Portfolio investment recorded a net outflow of USD 3.2 billion during April-December 2016 as compared with USD 3.0 billion a year ago.

 -In April-December 2016, there was an accretion of USD 14.2 billion to the foreign exchange reserves.

Source: RBI