Capitalstars Updates: India’s current account deficit more than doubles to $7.2 billion: 14 Dec 2017

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India’s July-September current account deficit more than doubled from a year earlier after imports accelerated while crude prices surged, as per 
Reserve Bank of India report.

India’s current account deficit (CAD) at $7.2 bn (1.2% of GDP) in Q2 of 2017-18 narrowed sharply from $15bn (2.5% of GDP) in the preceding quarter but was substantially higher than $3.4 bn (0.6% of GDP) in Q2 of 2016-17.

The widening of the CAD on a year-on-year basis was primarily on account of a higher trade deficit ($32.8 bn) brought about by a larger increase in merchandise imports relative to exports.

The net services receipts increased by 13.1% on a year-on-year basis mainly on the back of a rise in net earnings from software services and travel receipts. Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $17.4 bn, increasing by 14.7% from their level a year ago.

In the financial account, net foreign direct investment at $12.4 bn in Q2 of 2017-18 moderated from its level in Q2 of 2016-17. Portfolio investment recorded net inflow of $2.1 bn in Q2 of 2017-18, lower than $6.1 bn in Q2 last year on account of net sale in the equity market.

Further, the net receipts on account of non-resident deposits amounted to $0.7 bn in Q2 of 2017-18, lower than $ 2.1 bn a year ago.

In Q2 of 2017-18, there was an accretion of $9.5 bn to the foreign exchange reserves (on BoP basis) as compared with $8.5 bn in Q2 of 2016-17 and $ 11.4 bn in the preceding quarter.

On a cumulative basis of a balance of payments, the CAD increased to 1.8% of GDP in H1 of 2017-18 from 0.4% in H1 of 2016-17 on the back of widening of the trade deficit.

India’s trade deficit increased to $74.8 bn in H1 of 2017-18 from $49.4 bn in H1 of 2016-17.

Net invisible receipts were higher in H1 of 2017-18 mainly due to increase in net services earnings and private transfer receipts.

Net FDI inflows during H1 of 2017-18 moderated by 6.3% over the level during the corresponding period of the previous year.

Portfolio investment recorded a net inflow of $14.5 bn during H1 as compared with $ 8.2 bn a year ago.

In H1 of 2017-18, there was an accretion of $20.9 billion to foreign exchange reserves.

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