Current account surplus at 0.9 per cent in pandemic year due to sharp contraction in trade deficit

NEW DELHI:  India recorded a current account surplus of 0.9 per cent of GDP in financial year 2020-21 driven by the sharp contraction in trade deficit to $102.2 billion from $157.5 billion in 2019-20.

According to data released by the Reserve Bank of India, current account deficit widened to $8.1 billion or 1 per cent of GDP for the March quarter, against a surplus of $0.6 billion, or 0.1 per cent of the GDP, last year.  

The CAD, the gap between the country’s overall foreign receipts and payments, is an important factor signalling the strength of a nation’s external sector.

India’s current account deficit in the March quarter was higher primarily due to a higher trade deficit and lower net invisible receipts than in the corresponding period of the previous year, the RBI said.

Invisibles are international payments and movement of money without the exchange of goods and services.

“Net invisible receipts were lower in FY21 due to an increase in net outgo of overseas investment income payments and lower net private transfer receipts, even though net services receipts were higher than the year-ago period,” it said. 

Meanwhile, external commercial borrowings by India Inc recorded an inflow of $0.2 billion as compared to $ 21.7 billion in 2019-20.

Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $20.9 billion, up 1.7 per cent from the previous year.

The net outgo from the primary income account, primarily reflecting net overseas investment income payments, increased to $8.7 billion from $4.8 billion.