India records current account deficit (CAD) of 1.2% in FY22

The current account deficit (CAD) for India in the fiscal year 2021-22 has come in at 1.2%. The deficit in the fourth quarter moderated to 1.5% from 2.6% in Q3.

The trade deficit increased to US$ 189.5 billion from US$ 102.2 billion a year ago, recording a deficit of 1.2% of GDP in 2021–22 as compared to a surplus of 0.9% in 2020–21.

Even though net income outgo was higher than a year ago, net invisible receipts were higher in 2021–22 as a result of an increase in net service exports and net private transfer receipts.

Indian BoP in Q4 2021-22: Highlights

• In the fourth quarter of 2021–2022, India's current account deficit (CAD) dropped from US$ 22.2 billion (2.6 percent of GDP) in the third quarter to US$ 13.4 billion (1.5 percent of GDP).

• A stabilisation in the trade deficit and a decrease in the net outflow of primary income were the key causes of the sequential decline in the CAD in Q4:2021–2022.

• On the strength of an increase in net earnings from computer and business services, net services revenues increased both sequentially and year over year (y-o-y).

• Private transfer receipts rose to US$ 23.7 billion, up 13.4% from their level a year ago, primarily made up of remittances from Indians working abroad.

• The primary income account's net outflow declined sequentially and year over year, with the majority of it representing net income payments on foreign investments.

• In Q4:2021–2022, India's net external commercial borrowings (ECBs) fell from US$ 6.1 billion to US$ 3.3 billion.

• In contrast to Q4:2020–21, when foreign exchange reserves added $3.4 billion, there was a drawdown of $16.0 billion (on a BoP basis).

BoP for 2021–2022.

• Net FDI inflows decreased from US$ 44.0 billion in 2020–21 to US$ 38.6 billion in 2021–22.
• In 2021–2022, Net FPI had an outflow of US$ 16.8 billion compared to an inflow of US$ 36.1 billion the previous year.
• Inflows from Net ECBs to India increased to US$ 7.4 billion in 2021–22 from US$ 0.2 billion in 2020–21.
• Foreign currency reserves increased by US$47.5 billion in 2021–2022 (on a BoP basis).