India likely to see current account surplus in FY21, says economic survey

NEW DELHI:  India may witness current account surplus of 2% in FY21 after a gap of 17 years, according to The Economic Survey 2020-21 released on Friday.

This feat will be achieved on the back of the country’s resilient software service export and plunge in global crude prices, primarily in the first quarter FY21, due to Covid-19 caused disruption. 

Current account surplus refers to positive current account balance (difference between exports and imports of goods and services). According to data available, India’s import of crude came down to $31.2 billion during April-November this fiscal from $68 billion same period last fiscal.

Net services receipts amounting to $41.7 billion remained stable in April-September 2020 compared to $40.5 billion in corresponding period a year ago. Software services accounted for 49% of total services exports. 

India’s current account deficit averaged 2.2% of GDP in the past 10 years.  Reversing this trend, current account balance turned into surplus (0.1% of GDP) in Q4FY20 on the back of a lower trade deficit and a sharp rise in net invisible receipts.

This quarterly surplus was registered after a gap of 13 years after Q4FY07. This has been followed by successive current account surpluses in Q1 and Q2 of FY21.

In H1FY21, steep contraction in merchandise imports and lower outgo for travel services led to a sharper fall in current payments (by 30.8 per cent) than current receipts (15.1 per cent) – leading to a current account surplus of US$ 34.7 billion (3.1 per cent of GDP).