Current account deficit widens to 2.5% of GDP in Q3https://indianexpress.com/article/business/economy/current-account-deficit-widens-to-2-5-of-gdp-in-q3-5649418/

Current account deficit widens to 2.5% of GDP in Q3

Current account deficit was at 2.1% of GDP in third quarter of 2017-18

Current account deficit widens to 2.5% of GDP in Q3
According to the RBI, trade deficit increased to 5.3 billion in April-December 2018 from 8.4 billion in April-December 2017. (File)

India’s current account deficit (CAD) at $16.9 billion (2.5 per cent of GDP) in October-December of 2018-19 increased from $13.7 billion (2.1 per cent of GDP) in Q3 of 2017-18. However, CAD has moderated from $19.1 billion (2.9 per cent of GDP) in the preceding quarter.

According to Reserve Bank data, the widening of the CAD on a year-on-year (YoY) basis was primarily on account of a higher trade deficit at $49.5 billion as compared with $44 billion a year ago. The RBI said net services receipts increased by 2.8 per cent on a YoY basis mainly on the back of a rise in net earnings from telecommunications, computer and information services and financial services.

“Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $18.7 billion, increasing by 6.3 per cent from their level a year ago,” it said. In the financial account, net foreign direct investment at $7.5 billion in Q3 of 2018-19 increased from $4.3 billion in Q3 of 2017-18, the RBI said.

However. portfolio investment recorded net outflow of $2.1 billion in Q3 of 2018-19 – as compared with an inflow of $5.3 billion in Q3 last year – on account of net sale in the equity market.

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Net inflow on account of external commercial borrowings increased to $ 2.0 billion in Q3 of 2018-19 from $ 0.3 billion a year ago. According to the RBI, in Q3 of 2018-19, there was a depletion of $4.3 billion of the foreign exchange reserves (on BoP basis) as against an accretion of $9.4 billion in Q3 of 2017-18. CAD increased to 2.6 per cent of GDP during April-December 2018 from 1.8 per cent April-December 2017 on the back of widening of the trade deficit.

According to the RBI, trade deficit increased to $145.3 billion in April-December 2018 from $118.4 billion in April-December 2017. It said net invisible receipts were higher in April-December 2018 mainly due to increase in net services earnings and private transfer receipts.

Meanwhile, net FDI inflows in April-December 2018 increased to $24.8 billion from $23.9 billion in April-December 2017.