India’s Current Account Deficit Widens To 2.9% Of GDP In September Quarter

Dec 07 2018, 2:39 PMDec 07 2018, 2:49 PMDecember 07 2018, 2:39 PMDecember 07 2018, 2:49 PM

India's current account deficit widened to 2.9 percent of the gross domestic product in the quarter ended September compared with 1.1 percent in the year-ago period. The Reserve Bank of India on Friday said that this was mainly due to a large trade deficit.

Current account deficit is the difference between outflow and inflow of foreign exchange in the country's current account. It stood at $19.1 billion during the quarter ended September.

It increased from $6.9 billion or 1.1 percent of GDP in the second quarter of 2017-18. The current account deficit stood at $15.9 billion, which is 2.4 percent of GDP, in the April-June quarter.

"India's CAD at $19.1 billion (2.9 percent of GDP) in second quarter of 2018-19 increased from $6.9 billion (1.1 percent of GDP) in Q2 of 2017-18 and $15.9 billion (2.4 percent of GDP) in the preceding quarter," the RBI said.

The CAD has increased to 2.7 percent of GDP in first half of 2018-19 from 1.8 percent in the corresponding period of 2017-18 on the back of widening of the trade deficit. As per the central bank, the widening of the current account deficit on a year-on-year basis was primarily on account of a higher trade deficit at $50 billion as compared with $32.5 billion a year ago.

The central bank’s preliminary data on India’s balance of payments for July-September 2018-19 further revealed that net services receipts increased by 10.2 percent on a yearly basis, mainly on the back of a rise in net earnings from software and financial services.

Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $20.9 billion during the quarter, increasing by 19.8 percent from their level a year ago.

In the financial account, net foreign direct investment at $7.9 billion in the second quarter of 2018-19 moderated from $12.4 billion in the similar period of last fiscal. The RBI said that portfolio investments recorded net outflow of $1.6 billion as compared with an inflow of $2.1 billion in the second quarter last year on account of net sales in both the debt and equity markets.

Further, net receipts on account of non-resident deposits increased to $3.3 billion in the second quarter of 2018-19 from $0.7 billion a year ago. In July-September this fiscal, there was a depletion of $1.9 billion of the foreign exchange reserves as against an accretion of $9.5 billion in the year ago period.