India Q4 CAD dips to 0.2% of GDP

Balance of Payments into positive with addition to forex reserves

India’s current account deficit (CAD) for the quarter ended March this year fell sharply to 0.2 per cent of gross domestic product ($1.2 billion) from 3.6 per cent ($18.1 billion) a year earlier, as the fall in imports was steeper than the drop in exports.

On the balance-of-payments (BoP) front, the March 2014 quarter saw accretion of $7.1 billion to foreign exchange reserves, against accretion of $2.7 billion in the year-ago period. In the December 2013 quarter, accretion stood at $19.1 billion.

For 2013-14, the CAD was 1.7 per cent ($32.4 billion), well within the Reserve Bank of India (RBI)’s comfort level of 2.5 per cent, against 4.7 per cent ($87.8 billion) for 2012-13. For 2013-14, the BoP was in positive territory, with a $15.5 billion rise in reserves, against a rise of $3.8 billion in 2012-13.

For the third consecutive time, RBI sprung a surprise by releasing CAD and BOP data ahead of the standard period of publication of such information.

In a statement, RBI said the low CAD for the March quarter was primarily due to a decline in the trade deficit, as the fall in imports was sharper than that in exports. While exports declined 1.3 per cent to $83.7 billion in the March quarter, merchandise imports declined 12.3 per cent to $114.3 billion, compared with a one per cent drop in the year-ago period.

The decline in imports was primarily led by a steep fall in gold imports, which stood at just $5.3 billion, significantly lower than $15.8 billion a year ago, RBI said. On the services trade front, at $19.6 billion, net services rose 15.6 per cent year-on-year in the March quarter.

At $6.4 billion, net outflow due to primary income (profit, dividend and interest) was higher in the March quarter, compared with $5.2 billion in the corresponding period of FY13. Gross private transfer receipts rose 3 per cent to $17.3 billion.