Current account balance records surplus of 0.6% of GDP in Q4FY24: RBI

In Q4 FY2023, the current account deficit (CAD) stood at $1.3 billion, or 0.2 per cent of GDP, the Reserve Bank of India’s (RBI) data showed. In Q3 FY24, the CAD was $8.7 billion, or 1 per cent of GDP.

Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $31.9 billion in the second quarter of the current fiscal from $28.1 billion in the year-ago period.

The country’s current account balance recorded a surplus of $5.7 billion, or 0.6 per cent of gross domestic product (GDP) in the January-March 2024 quarter, driven by a lower merchandise trade deficit.

In Q4 FY2023, the current account deficit (CAD) stood at $1.3 billion, or 0.2 per cent of GDP, the Reserve Bank of India’s (RBI) data showed. In Q3 FY24, the CAD was $8.7 billion, or 1 per cent of GDP.

The current account deficit is the difference between exports and imports of goods and services. It is a key indicator of the country’s external sector.

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For the full year (FY24), the country’s current account deficit moderated to $23.2 billion, or 0.7 per cent of GDP, from $67 billion, or 2 per cent of GDP, during FY23, on the back of a lower merchandise trade deficit, the RBI data released on Monday showed.

In Q4 FY24, the merchandise trade deficit stood at $50.9 billion, lower than $52.6 billion in the year-ago period.

ICRA Ltd Chief Economist, Head of Research and Outreach, Aditi Nayar, said the current account turned to a welcome surplus in Q4 FY24 after a gap of ten quarters.

“The turnaround to a surplus in Q4 FY24 from a deficit in the year-ago period, was primarily driven by a narrowing merchandise trade deficit print to a ten-quarter low of $50.9 billion in Q4 FY24 from $69.9 billion in Q3 FY24,” Nayar said.

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Services exports grew by 4.1 per cent on a y-o-y basis in the fourth quarter of FY24 on the back of rising exports of software, travel and business services. Net services receipt at $42.7 billion was higher than its level a year ago ($39.1 billion), which contributed to the surplus in the current account balance during Q4 of 2023-24, the RBI data showed.

Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $32 billion, a jump of 11.9 per cent over their level a year ago.

In the fourth quarter of FY24, net foreign direct investment (FDI) flows declined to $2 billion, as compared with $6.4 billion a year ago.

Foreign portfolio investment (FPI) recorded a net inflow of $11.4 billion in the reporting quarter as against a net outflow of $1.7 billion during Q4 FY23.

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Net inflows under external commercial borrowings to the country amounted to $2.6 billion in the January-March quarter of FY24, as compared with $1.7 billion a year ago. Non-resident deposits recorded a higher net inflow of $5.4 billion than $3.6 billion.

The country’s foreign exchange reserves on a balance of payment (BoP) basis (excluding valuation effects) increased by $30.8 billion in Q4 FY24, as compared with an accretion of $5.6 billion in the year-ago period. In 2023-24, there was an accretion of $63.7 billion to the foreign exchange reserves (on a BoP basis).

Bank of Baroda’s Chief Economist Madan Sabnavis said for FY25, going by the early trends, the CAD should be manageable at 1-1.5 per cent of GDP and the steady capital inflows should ensure that the balance of payments which reflect the fundamentals remain comfortable.

This will also keep the rupee range bound at Rs 83-84/$ with external factors like the strength of the dollar guiding the currency, he said.