India’s current account deficit at a 4-year high of 2.4% in April-June quarter

The country's current account deficit (CAD), which is the shortfall in its exports compared to its imports, has widened sharply to 2.4 per cent of gross domestic product (GDP) during the quarter ended June 2017. This is the widest gap since June 2013 when the rupee had come under severe pressure.

The balance of payments for the April-June quarter stood at $11.4 billion against $6.7 billion in the year-ago period on the back of foreign inflows.

According to data released by the RBI, the CAD for the April-June 2017-18 quarter was $14.3 billion, which amounts to 2.4 per cent of the country's GDP. This was due mainly to a surge in imports. Against this the CAD for the whole of fiscal 2016-17 stood at around $15 billion.

India's current account deficit stood at $ 0.4 billion (or 0.1 per cent of GDP) in Q1 of 2016 -17 and $3.4 billion (0.6 per cent of GDP) in Q4 of 2016-17.

The widening of the CAD on a year-on-year (y-o-y) 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, RBI noted.

Net services receipts increased by 15.7 per cent on a y-o-y basis mainly on the back of a rise in net earnings from travel, construction and other business services.

Private transfer receipts, mainly representing remittances by Indians employed overseas, at $ 16.1 billion increased by 5.3 per cent over the corresponding quarter of previous year.

In the financial account, net foreign direct investment at $7.2 billion in Q1 of 2017-18 almost doubled from its level in Q1 of 2016-17.

Net portfolio investment recorded substantial inflow of $12.5 billion in Q1 of 2017-18, primarily in the debt segment, compared with $2.1 billion in Q1 of the previous year.

Net receipts on account of non-resident deposits amounted to $1.2 billion in Q1 of 2017-18; this was lower than $1.4 billion a year ago.

In Q1 of 2017-18, there was an accretion of $11.4 billion to the foreign exchange reserves (on BoP basis) as compared with $7.0 billion in Q1 of 2016-17 and $7.3 billion in the preceding quarter.