India's current account gap widens in Q1 on back of rising trade deficit

India's current account deficit widened in the three months from April to June on the back of the widening of the merchandise trade deficit and net outgo on investment income payments, the Reserve Bank of India said on Thursday.

India’s current account balance recorded a deficit of US$ 23.9 billion, or 2.8% of GDP, in Q1FY23, up from US$ 13.4 billion (1.5% of GDP) in Q4FY22 and a surplus of US$ 6.6 billion (0.9% of GDP) a year ago [i.e., Q1 FY22], the RBI said in a statement.

"Underlying the current account deficit in Q1FY23 was the widening of the merchandise trade deficit to US$ 68.6 billion from US$ 54.5 billion in Q4FY22 and an increase in net outgo of investment income payments," the RBI said.

Net services receipts saw an increase, both sequentially and on an annual basis owing to rising exports of computer and business services. Services exports grew year-on-year by 35.4%, led by broad-based growth in computer, business, transportation, and travel services.



Private transfer receipts, which mainly represent the remittances by Indians employed overseas, rose 22.6% YoY to US$ 25.6 billion.

Net outgo on the income account, which primarily reflects payments of investment income, increased to US$ 9.3 billion from US$ 7.5 billion a year ago, the statement said.

The net foreign direct investment in India increased to US$ 13.6 billion from US$ 11.6 billion a year ago while the net foreign portfolio investment recorded outflows of US$ 14.6 billion as against net inflows of US$ 0.4 billion during Q1FY22.