India’s CAD declines to 1.2 pc of GDP in Oct-Dec quarter reflecting stronger economy

Mumbai, March 26 (IANS) India’s Current Account Deficit (CAD) declined to $10.5 billion (1.2 per cent of GDP) in the October-December quarter (Q3) of 2023-24 from $16.8 billion (2.0 per cent of GDP) in the same quarter of 2022-23, according to official figures released by the RBI on Tuesday.

Sequentially also the CAD was lower than the corresponding figure of $11.4 billion (1.3 per cent of GDP) in the preceding second quarter (July-September) of 2023-24, the data show.

The decline in CAD reflects a strengthening of the macroeconomic fundamentals of the Indian economy.

The merchandise trade deficit at US$ 71.6 billion was marginally higher than US$ 71.3 billion during Q3:2022-23.

Services exports grew by 5.2 per cent on a year-on-year basis on the back of rising exports of software, business and travel services. Net services receipts increased both sequentially and from a year ago which helped cushion the current account deficit, the RBI said.

Net outgo on the primary income account, primarily reflecting payments of investment income, increased to $13.2 billion from $12.7 billion a year ago.

Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to US$ 31.4 billion, an increase of 2.1 per cent over their level during the corresponding period a year ago.

In the financial account, foreign direct investment recorded a net inflow of $4.2 billion as compared with a net inflow of $2.0 billion in Q3:2022-23.

Other highlights are:

* Foreign portfolio investment recorded a net inflow of US$ 12.0 billion, higher than US$ 4.6 billion during Q3:2022-23.

* External commercial borrowings to India recorded a net outflow of US$ 2.6 billion in Q3:2023-24 as compared with a net outflow of US$ 2.5 billion a year ago.

* Non-resident deposits recorded a higher net inflow of US$ 3.9 billion than US$ 2.6 billion a year ago.

* There was an accretion of foreign exchange reserves (on a BoP basis) to the tune of US$ 6.0 billion in Q3:2023-24 as compared with an accretion of US$ 11.1 billion a year ago (Table 1).

Balance of Payments (BoP) during April-Dec 2023

* India’s current account deficit moderated to 1.2 per cent of GDP during April-December 2023 from 2.6 per cent of GDP in the corresponding period a year ago on the back of a lower merchandise trade deficit.

* Net invisibles receipts were higher during April-December 2023 than a year ago, primarily on account of services and transfers.

* Net FDI inflow at US$ 8.5 billion during April-December 2023 was lower than US$ 21.6 billion during April-December 2022.

* During April-December 2023, portfolio investment recorded a net inflow of US$ 32.7 billion as against an outflow of US$ 3.5 billion during the corresponding period a year ago.

* In April-December 2023, there was an accretion of US$ 32.9 billion to the foreign exchange reserves (on a BoP basis that excludes valuation effects