India’s Current Account Deficit At 2% Of GDP In April-June Quarter
India’s current account deficit widened in the April-June quarter when compared to the previous three months but remained within comfortable limits.
The current account gap in the first quarter of financial year 2019-20 stood at $14.3 billion or 2 percent of GDP. This is wider than the $4.6 billion (0.7 percent of GDP) in the fourth quarter of FY19 but narrower than the $15.8 billion (2.3 percent of GDP) in the first quarter of last financial year.
“The current account contracted on a year-on-year (y-o-y) basis, primarily on account of higher invisible receipts at $ 31.9 billion as compared with US$ 29.9 billion a year ago,” the RBI said.
Net services receipts increased by 7.3 percent on a year-on-year basis, due to a rise in net earnings from travel, information technology and financial services. Private transfers, including remittances by Indians employed overseas, rose to $19.9 billion, increasing 6.2 percent from a year ago.
In a positive surprise, the current account deficit in Q1 FY20 printed modestly lower than expected, on the back of smaller than anticipated outflows of primary income. Additionally, healthy growth in the surplus of services and secondary income, as well as lower crude oil prices helped to restrain the size of the current account deficit in Q1 FY20, despite a sharp increase in gold imports.Aditi Nayar, Economist, ICRA
In the financial account, net foreign direct investments rose to $13.9 billion in the first quarter compared to $9.6 billion last year. There was a net inflow of $4.8 billion in foreign portfolio investments in the first three months of the current financial year compared to an outflow of $8.1 billion last year.
Inflows on account of external commercial borrowings were also higher.
External commercial borrowings brought in $6.3 billion in the first quarter of 2019-20 as against an outflow of $1.5 billion a year ago.
Strong inflows led to an accretion of $14.0 billion to the country’s foreign exchange reserves on a Balance of Payments basis, as against a depletion of $11.3 billion in the first quarter of 2018-19.