India’s Current Account Returns To Deficit As Economy Normalises

India’s current account in the three months ended December returned to deficit after two quarters, led by a rise in merchandise trade deficit.

The nation’s current account recorded a deficit of $1.7 billion in the October-December 2020 quarter against a surplus of $15.1 billion in the three months to September, the balance of payments data released by the Reserve Bank of India showed.

As a percentage of GDP, the current account balance was at 0.2% in the reported quarter compared with 2.4% in the preceding three months.

• The reversion to a deficit was on account of a rise in the merchandise trade deficit to $34.5 billion from $14.8 billion in the previous quarter.

• There was an accretion of $32.5 billion to foreign exchange reserves in BoP terms compared with $31.6 billion in the preceding three months.

Among key components, worker remittances contracted as expected.

• Worker remittances fell 7.2% in the October-December 2020 quarter on an annual basis compared with a 15.78% fall in July-September.

• Net foreign direct investment recorded an inflow of $17 billion compared with an outflow of $24.6 billion in the previous quarter.

• Net foreign portfolio investment rose to $21.2 billion versus $7 billion in the preceding quarter.

• External commercial borrowings to India recorded a net outflow of $1.7 billion against an outflow of $4.1 billion in July-September 2020.