India's current account deficit narrows sharply to 0.7% of GDP in Q4

India’s current account deficit (CAD) narrowed sharply to 0.7 per cent of the gross domestic product (GDP) in the fourth quarter ended March 31, 2019 (Q4), from 2.7 per cent in the third quarter ended December 2018, primarily on account of a lower trade deficit, even as foreign portfolio inflows remained robust.

In Q4FY18, the CAD stood at 1.8 per cent of GDP. However,  it rose to 2.1 per cent of GDP in FY19 from 1.8 per cent in FY18 “on the back of a widening trade deficit”, the Reserve Bank of India said in a statement on its website. In FY19, there was net outflow of portfolio funds of $2.4 billion, against an inflow of $22.1 billion a year ago. The trade deficit for the full year increased to $180.3 billion in FY19 from $160 billion in FY18.

In absolute terms, the CAD stood at $4.6 billion in the current fourth quarter, compared with $13 billion in the year-ago quarter and $17.7 billion in the third quarter of fiscal year 2018-19. “The contraction of the CAD on a year-on-year (yoy) basis was primarily on account of a lower trade deficit at $35.2 billion as compared with $41.6 billion a year ago,” the RBI said.

Foreign portfolio investment recorded net inflow of $9.4 billion in Q4FY19 — as compared to a net outflow of $2.1 billion in the October-December quarter. In the Q4FY18, the net inflow was close to $2.3 billion. Net foreign direct investment at $6.4 billion in Q4FY19 remained at the same level as in Q4FY18.

Net services receipts increased by 5.8 per cent year-on-year, mainly on the back of a rise in net earnings from telecommunications, computer and information services, the statement said. It added that private transfer receipts — mainly representing remittances by Indians employed overseas — at $17.9 billion, declined by 0.9 per cent from a year ago. Inflow on account of external commercial borrowings to India increased to $7.2 billion in Q4FY19, from $1 billion a year ago.