Current account deficit widens to $9.7 billion in April-June quarter: RBI

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.

“The widening of CAD (in Q1 on a year-on-year (y-o-y) basis was primarily due to a rise in merchandise trade deficit to $65.1 billion in Q1 2024-25 from $56.7 billion in Q1 2023-24,” the RBI data showed.

Net services receipts increased on a year-on-year basis to $39.7 billion in April-June 2024 quarter from $35.1 billion in the year-ago period. Services exports have risen on a year-on-year basis across major categories such as computer services, business services, travel services and transportation services.

Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $29.5 billion in Q1 FY2025 from $27.1 billion in the corresponding quarter of the previous year.

The data showed that in the financial account, net foreign direct investment inflows increased to $6.3 billion in the April-June 2024 quarter from $4.7 billion a year-ago. The net inflows under foreign portfolio investment moderated to $0.9 billion from $15.7 billion in the same quarter of last year.

“FDI flows were higher this quarter though FPI was lower. The latter will turnaround given the debt flows expected due to the inclusion of bonds in the JP Morgan index,” said Madan Sabnavis, Chief Economist, Bank of Baroda.

Net inflows under external commercial borrowings (ECBs) to India amounted to $1.8 billion in Q1 FY25, lower than $5.6 billion in the corresponding period a year ago.

Non-resident deposits (NRI deposits) recorded net inflows of $4 billion, higher than $2.2 billion a year ago, the data showed.

In the reporting quarter, there was an accretion of $5.2 billion to the foreign exchange reserves on a Balance of Payment (BoP) basis as compared with $24.4 billion in Q1 FY2024.