India’s current account balance recorded a deficit of $ 8.3 billion at 1.0 per cent of GDP)in the September 2023 quarter, lower than $ 9.2 billion at 1.1 per cent of GDP in the June 2023 quarter and
$ 30.9 billion or 3.8 per cent of GDP a year ago according to the preliminary numbers released by the Reserve Bank of India . ” The CAD is below our expectation led primarily by a smaller-than-anticipated merchandise trade deficit” said Aditi Nayar, chief Economist, head-research and outreach, Icra.
Services exports grew by 4.2 per cent on a y-o-y basis on the back of rising exports of software, business and travel services. Net services receipts increased both sequentially and on a y-o-y basis.
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 per cent from their level during the corresponding period a year ago, RBI said in a release.
In the financial account, net foreign direct investment witnessed an outflow of $ 0.3 billion as against an inflow of $ 6.2 billion in September 2023, according to RBI. “ The capital account surplus weakened materially quarter-on-quarter, also as expected, as FDI turned negative for the first time since the second quarter of 2020, and portfolio inflows, while positive, still slowed. Still, the balance of payments was in a small surplus of $ 2.5bn for the quarter” said Rahul Bajoria, chief India economist at Barclays Capital.But the CAD is expected to widen in the current quarter. “ Following the expansion in the merchandise trade deficit in October 2023, we expect the CAD for the ongoing quarter to widen appreciably, to around US$18-20 billion. Nevertheless, we now foresee the FY2024 CAD in a range of 1.5-1.6% of GDP, unless commodity prices chart a sharp rebound” said Nayar.INSET:
Excluding valuation effects, foreign exchange reserves increased by $ 27.0 billion during April-September 2023 as against a depletion of $ 25.8 billion during April-September 2022, RBI said. Foreign exchange reserves in nominal terms- including valuation effects- increased by $ 9.3 billion during April-September 2023 as against a decrease of $ 74.6 billion in the corresponding period of the preceding year, according to release by the central bank.
