Current account deficit dips sharply to 1% of GDP in Q2

Mumbai, December 26

India’s current account deficit (CAD) declined sharply to 1% of the GDP or $8.3 billion in the second quarter (Q2) of the current financial year, mainly due to lower merchandise trade deficit and growth in services exports, according to a RBI data released on Tuesday.

The CAD, which represents the difference between the total money sent abroad and money received from overseas across the economy, was 3.8% of GDP or $30.9 billion in the July-September quarter in 2022-23.

CAD was $9.2 billion or 1.1% of GDP in the first quarter (April-June) of the current financial year 2023-24.

“Underlying the lower current account deficit on a year-on-year (y-o-y) basis in Q2:2023-24 was the narrowing of merchandise trade deficit to $61 billion from $78.3 billion in Q2:2022-23,” said the data on Developments in India’s Balance of Payments during the second quarter (July-September) of 2023-24.

Services exports grew by 4.2% on a y-o-y basis on the back of rising exports of software, business and travel services, the Reserve Bank said. Net services receipts increased both sequentially and on a y-o-y basis, it added.

In the first half of the fiscal, CAD moderated to 1% of GDP from 2.9% of GDP in the year-ago period, on the back of a lower merchandise trade deficit.

During the Q2, the RBI data showed that net outgo on the primary income account, primarily reflecting payments of investment income, increased to $12.2 billion, from $11.8 billion a year ago.

Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $28.1 billion, an increase of 2.6% from their level during the corresponding period a year ago. — PTI

Growth in services exports key reason

• The current account deficit (CAD) was 3.8% of GDP or $30.9 billion in the July-September quarter in 2022-23
• It was $9.2 billion or 1.1% of GDP in the first quarter (April-June) of the current financial year 2023-24
• The reason for decline in CAD was narrowing of merchandise trade deficit to $61 billion from $78.3 billion in Q2 of 2022-23