Dec quarter CAD dips to 1.3% of GDP

Contraction primarily on account of a lower trade deficit, says RBI

The country’s current account deficit (CAD) narrowed to $7.1 billion (1.3 per cent of gross domestic product) in the quarter ended December 2015, from $ 7.7 billion (1.5 per cent of GDP) in the year-ago period.

The CAD was also lower when compared to $8.7 bn (1.7 per cent of GDP) recorded in the second quarter ended September 2015.

The contraction in the CAD was primarily on account of a lower trade deficit ($34 billion) than in Q3 of last year ($38.6 billion) and $37.4 billion in the preceding quarter, RBI said in a statement.

For April-December 2015, the current account deficit narrowed to $21.9 billion (1.4 per cent of GDP) from $26.1 billion (1.7 per cent of GDP) in April-December 2014.

Madan Sabnavis, chief economist, CARE Ratings, said the CAD would be in the range of 1.5 per cent of GDP for FY16.

The Balance of Payments (BoP) remained in the positive territory in Q3. The reserves increased by $4.1 bn in the quarter ended December 2015 against an increase of $13.2 bn in the year-ago period, according to RBI data.

There was an accretion of $14.6 billion to foreign exchange reserves in April-December 2015 against $31.3 billion in April-December 2014, RBI said.

The central bank said net services receipts for Q3 of FY16 moderated on a y-o-y basis largely due to a fall in export receipts in transport and financial services, though there was a marginal improvement over the preceding quarter.

Private transfer receipts, mainly representing remittances by Indians employed overseas, were $ 15.8 billion, a decline from the levels seen in the preceding quarter as well as from a year ago.

Referring to the FY17 outlook, Sabnavis said exports continued to be an issue and in case commodity prices hardened, there can be challenges in balance of trade in FY17. However, it would still be less than two per cent in the worst-case situation.