Current account deficit widens in Q4 to 0.6% y-o-y

India’s current account deficit (CAD) in the fourth quarter (Q4) widened to $3.4 billion, or 0.6 per cent of gross domestic product (GDP), against $0.3 billion (0.1 per cent of GDP) in Q4 of 2015-16, owing to a widening trade deficit. However, the CAD was substantially less than $8 billion (1.4 per cent of GDP) in the third quarter ended December 2016, data released by the Reserve Bank of India showed. 

Overall, on a cumulative basis, the CAD narrowed to 0.7 per cent of GDP in 2016-17 from 1.1 per cent in 2015-16, on the back of the contraction in the trade deficit. Trade deficit year-on-year (YoY) in Q4 was at $29.7 billion. 

Net services receipts increased on a YoY basis on the back of a rise in net earnings from travel, transport, construction and other business services. Private transfer receipts, mainly representing remittances by Indians employed overseas, remained flat YoY at $15.7 billion.

Net foreign direct investment at $5 billion in Q4 of 2016-17 moderated from its level a year ago, but net portfolio investment recorded substantial inflow of $10.8 billion in Q4 of 2016-17 in both equity and debt segment, against net outflow of $1.5 billion in Q4 last year.

Net receipts of non-resident deposits amounted to $2.7 billion in Q4 of 2016-17, lower than $ 4.4 billion a year ago. In Q4, there was an accretion of forex reserves to the tune of $7.3 billion, compared with an increase of $3.3 billion in the year-ago quarter. The country’s trade deficit narrowed to $112.4 billion in 2016-17 from $130.1 billion in 2015-16.

Net invisible receipts were lower, mainly due to moderation in both software exports and net private transfer receipts, and higher outgo on account of primary income (profit, interest and dividends).

Gross foreign direct investment inflows to India in 2016-17 at $60.2 billion increased significantly from $55.6 billion in 2015-16.

Portfolio investment recorded a net inflow of $7.6 billion in 2016-17 as against an outflow of US $4.5 billion a year ago.

In 2016-17, there was an accretion of $21.6 billion to the foreign exchange reserves as compared with US $17.9 billion in 2015-16.