The CAD is a critical indicator of the macroeconomic health and represents the gap between the overall foreign exchange expended and received in the economy.

India's current account deficit narrowed sharply to $1.4 billion or 0.2 per cent of GDP in the December quarter, the Reserve Bank said on Thursday.

The deficit was at 2.7 per cent of the GDP in the year-ago period and 0.9 per cent in the preceding quarter.

The sharp contraction was primarily due to a lower trade deficit at $34.6 billion, and a rise in net services receipts, the central bank said.

The CAD is a critical indicator of the macroeconomic health and represents the gap between the overall foreign exchange expended and received in the economy.

The data also comes on a day when the rupee depreciated to a 17-month low of 74.24 against the US dollar.

For the first nine months of the fiscal year, the CAD has narrowed to 1 per cent of the GDP.