India's current account deficit declines to 2.2% of GDP in Q3FY23

Underlying the lower CAD in Q3FY23 was the narrowing of merchandise trade deficit to $72.7 bn from $78.3 billion in Q2FY23, coupled with robust services and private transfer receipts, RBI said

Mumbai

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3 min read Last Updated : Mar 31 2023 | 7:35 PM IST

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India’s current account deficit (CAD) declined sequentially to $18.2 billion, or 2.2 per cent of the country's GDP, in the quarter ended December 2022 from $30.9 billion in Q2FY23 (3.7 per cent of GDP).

The CAD was $22.2 billion (2.7 per cent of GDP) in December 2021 (Q3FY22).

Underlying the lower CAD in Q3FY23 was the narrowing of the merchandise trade deficit to $72.7 billion from $78.3 billion in Q2FY23, coupled with robust services and private transfer receipts, Reserve Bank of India said.

Aditi Nayar, Chief Economist, Head - Research & Outreach, Icra, said, "Following the downward revision in the Q2FY23 current account deficit, the CAD for Q3 has printed well below expectations. The estimates for Q2FY23 were revised from a deficit of $36.4 billion (4.4 per cent of GDP in Q2Fy23, according to RBI data."

Net outgo from the primary income account, mainly reflecting payments of investment income, rose to $12.7 billion in Q3FY23 from $11.5 billion a year ago.

Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $30.8 billion, up 31.7 per cent from the year-ago level.

As for Balance of Payments (BoP) in Q3FY23, there was accretion of $11.1 billion to reserves, as against accretion of mere $0.5 billion in Q3FY22.

For April-April 2022 (9MFY23), the country's current account deficit rose to 2.7 per cent of GDP from 1.1 per cent of GDP in (9MFY22) due to a sharp increase in the merchandise trade deficit. Net invisible receipts were higher in 9MFY23, on account of higher net receipts of services and private transfers.

As for Balance of Payments (BoP) position in April-December 2022 (9MFY23), there was a depletion of $14.7 billion as against accretion of $63.5 billion in 9MFY22, RBI said.

With a considerable compression in the average trade deficit in Jan-Feb 2023 relative to the previous three months, the size of the CAD is expected to recede further to $10-12 billion in Q4FY23, Nayar said.

The CAD for FY23 is projected to be in the $77-80 billion range (2.3 per cent of GDP), which is quite contained as compared to the levels that were being feared in mid-2022, Icra added.

India’s CAD profile (in $ bn)

-	Q3FY23	Q3FY22
Current account balance	-18.2	-22.2
Current account balance (deficit/surplus) as % of GDP)	0.022	0.027
Goods	-72.7	-59.7
Services	38.7	27.8
Primary income	-12.7	-11.5
Secondary income	28.5	21.3