India's current account deficit sharply down at 1% of GDP in Q2

India's current account deficit declined sharply to $8.3 billion, or 1 per cent of the country’s GDP, in the second quarter of the current financial year (July-September 2023-24), mainly due to a fall in merchandise trade deficit and growth in services exports, according to RBI data released on Tuesday.

Current account deficit (CAD), which is the difference between the total amount of foreign exchange received by the country and net outflows from the country, stood at 3.8 per cent of GDP or $30.9 billion in the July-September quarter in 2022-23.

India had a current account deficit of $9.2 billion (1.1 per cent of GDP) in April-June 2023-24 and $30.9 billion (3.8 per cent of GDP) a year ago (Q2 of 2022-23).

India’s merchandise trade deficit declined to $61.0 billion in the first quarter of 2023-24 from $78.3 billion in Q2 of 2022-23 even as its services exports grew 4.2 per cent year-on-year 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.

Net outgo on the primary income account, primarily reflecting payments of investment income, increased to $12.2 billion from $11.8 billion a year ago.

Private transfer receipts, mainly remittances by Indian residents abroad, stood at $28.1 billion, an increase of 2.6 per cent from their level during the corresponding period a year ago.

Net foreign direct investment witnessed an outflow of $0.3 billion as against an inflow of $6.2 billion in Q2 of 2022-23.

Foreign portfolio investment recorded net inflow of 4.9 billion, lower than $6.5 billion during Q2 of 2022-23.

External commercial borrowings amounted to a net outflow of $1.8 billion in the previous year quarter against a net outflow of $0.5 billion in Q2 of 2022-23 financial year.

Non-resident deposits increased to $ 3.2 billion against net inflow of $2.5 billion in Q2 of Fy23.

Foreign exchange reserves (on a BoP basis) of the country increased by $2.5 billion in Q2 2023-24 against a depletion of $30.4 billion in Q2 of the previous fiscal, according to latest data released by the Reserve Bank of India (RBI).