India's current account deficit more than doubles Q-o-Q in Q3FY17

news
23 March 2017

India's current account deficit (CAD) increased to $7.9 billion in the third quarter of fiscal 2016-17 from $7.1 billion in the comparable quarter of the previous fiscal, although as a percentage of GDP it remained unchanged at 1.4 per cent.

CAD for October-December 2016-17, however, showed a significant increase from the level in July-September 2016-17 when it was $3.4 billion (0.6 per cent of GDP).

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, Reserve Bank of India figures released today showed.

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 $15.2 billion, having declined by 3.8 per cent from their level a year ago.

In the financial account, net foreign direct investment at $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 $11.3 billion as against net inflow of $0.6 billion in Q3 of last financial year; portfolio outflows occurred in both equity and debt segments.

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

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

On a cumulative basis, the CAD narrowed to 0.7 per cent of GDP in April-December 2016-17 from 1.4 per cent in the corresponding period of 2015-16 on the back of the contraction in the trade deficit.

India's trade deficit narrowed to $82.8 billion in April-December 2016 from $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 ($30.6 billion) rose 12.3 per cent over the level during the corresponding period of 2015-16.

Portfolio investment recorded a net outflow of $3.2 billion during April-December 2016-17 compared with $3.0 billion a year ago.

In April-December 2016-17, there was an accretion of $14.2 billion to the foreign exchange reserves.





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