NEW DELHI:
India'
s
current
account
deficit (
CAD) narrowed further
in the October-December
quarter on the back of a contraction
in the trade
deficit and rise
in net services receipts, the central bank said on Thursday.
The CAD declined to 0.2% of gross domestic product
in the three months, the third
quarter of the 2019/20 fiscal year, from 2.7%
in the same period a year before. On a quarterly basis, it shrank from 0.9% of
GDP
in the second
quarter.
The CAD measures the difference between the value of a country's imported and exported goods and services.
"The contraction
in the CAD (
in Q3 2019/20) was primarily on
account of a lower trade
deficit at $34.6 billion and a rise
in net services receipts at $21.9 billion," the Reserve Bank of India (
RBI) said
in a statement.
The RBI said net foreign direct investment at $10 billion
in the third
quarter was higher than the $7.3 billion
in the same
quarter last year while external commercial borrowing-related inflows stood at $3.2 billion compared with $2 billion a year earlier.
"This is a set of encouraging
current
account numbers. A narrow
current
account shortfall and a much bigger stock of foreign reserves set the Indian markets on firmer ground versus the 2013 sell-off," said Radhika Rao, economist with DBS Bank.
"With global oil prices correcting
sharply
in Q12020, oil imports bill will narrow, which coupled with weak core imports owing to sub-par private sector activity, should leave a narrower merchandise trade
deficit," she added.
India'
s foreign exchanges reserves stood at a comfortable $487.24 billion as of March 6, 2020.
Rao said the full-year
current
account
deficit could come
in at around 1% of GDP which would mean lower financing needs amid the global and local markets rout on the back of the spread of coronavirus which has triggered net capital outflows.
The Indian stock market plunged into bear territory on Thursday after the World Health Organization described the coronavirus outbreak as a pandemic, with the NSE Nifty 50 index plunging 8.3% to 9,590.15, its lowest close
in 2-1/2 years.
India'
s monthly trade
deficit however widened to $15.17 billion
in January compared with $14.73 billion a year earlier, and
sharply higher versus the
deficit of $11.25 billion
in December, trade ministry data last month showed.
Data last month showed annual economic growth slowed to a more-than-six-year low of 4.7%
in the October-December
quarter.
The
current
account
deficit stood at $1.4 billion
in the third
quarter of 2019/20 versus $17.7 billion a year ago. The merchandise trade
deficit narrowed to $34.6 billion from $49.3 billion, the central bank said.
Balance of payments stood at a surplus of $21.6 billion
in Q3 of 2019/20 compared with a
deficit of $4.3 billion a year ago, data showed. However, the surplus ballooned from $5.1 billion seen
in Q2.
Foreign portfolio investment recorded a net inflow of $7.8 billion
in Q3 of 2019/20 - against an outflow of $2.1 billion
in the same
quarter last year – on
account of net purchases
in both the debt and equity markets, the RBI said.