India’s current account deficit (CAD) in the fourth quarter (Q4) widened to $3.4 billion, or 0.6 per cent of gross domestic product (GDP), against $0.3 billion (0.1 per cent of GDP) in Q4 of 2015-16, owing to a widening trade deficit. However, the CAD was substantially less than $8 billion (1.4 per cent of GDP) in the third quarter ended December 2016, data released by the Reserve Bank of India showed.
Overall, on a cumulative basis, the CAD narrowed to 0.7 per cent of GDP in 2016-17 from 1.1 per cent in 2015-16, on the back of the contraction in the trade deficit. Trade deficit year-on-year (YoY) in Q4 was at $29.7 billion.
Net services receipts increased on a YoY basis on the back of a rise in net earnings from travel, transport, construction and other business services. Private transfer receipts, mainly representing remittances by Indians employed overseas, remained flat YoY at $15.7 billion.
Net foreign direct investment at $5 billion in Q4 of 2016-17 moderated from its level a year ago, but net portfolio investment recorded substantial inflow of $10.8 billion in Q4 of 2016-17 in both equity and debt segment, against net outflow of $1.5 billion in Q4 last year.
Net receipts of non-resident deposits amounted to $2.7 billion in Q4 of 2016-17, lower than $ 4.4 billion a year ago. In Q4, there was an accretion of forex reserves to the tune of $7.3 billion, compared with an increase of $3.3 billion in the year-ago quarter. The country’s trade deficit narrowed to $112.4 billion in 2016-17 from $130.1 billion in 2015-16.
Gross foreign direct investment inflows to India in 2016-17 at $60.2 billion increased significantly from $55.6 billion in 2015-16.
Portfolio investment recorded a net inflow of $7.6 billion in 2016-17 as against an outflow of US $4.5 billion a year ago.
In 2016-17, there was an accretion of $21.6 billion to the foreign exchange reserves as compared with US $17.9 billion in 2015-16.