India's current account deficit narrows sharply to 0.2% of GDP in Q3 of 2019-20

CAD narrows to 1.0% of GDP in April-December of 2019-20 from 2.6% in April-December of 2018-19

India's current account deficit (CAD) narrowed sharply to US$ 1.4 billion (0.2% of GDP) in Q3 of 2019-20 from US$ 17.7 billion (2.7% of GDP) in Q3 of 2018-19 and US$ 6.5 billion (0.9% of GDP) in the preceding quarter Q2 of 2019-20.

The contraction in the CAD was primarily on account of a lower trade deficit at US$ 34.6 billion and a rise in net services receipts at US$ 21.9 billion as compared with the corresponding period of last year.

Net services receipts increased on the back of a rise in net earnings from computer, travel and financial services.

Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to US$ 20.6 billion, up by 9.0% from their level a year ago.

In the financial account, net foreign direct investment at US$ 10.0 billion was higher than US$ 7.3 billion in Q3 of 2018-19.

Foreign portfolio investment recorded net inflow of US$ 7.8 billion - as against an outflow of US$ 2.1 billion in Q3 of 2018-19 - on account of net purchases in both the debt and equity market.

Net inflow on account of external commercial borrowings to India was US$ 3.2 billion as compared with US$ 2.0 billion in Q3 of 2018-19.

There was an accretion of US$ 21.6 billion to the foreign exchange reserves (on BoP basis) as against a depletion of US$ 4.3 billion in Q3 of 2018-19.

BoP during April-December 2019-20

The CAD narrowed to 1.0% of GDP in April-December of 2019-20 from 2.6% in April-December of 2018-19 on the back of a reduction in the trade deficit which shrank to US$ 118.9 billion in April-December 2019-20 from US$ 145.1 billion in April-December of 2018-19.

Net invisible receipts were higher in April-December of 2019-20, mainly due to increase in net services earnings and private transfer receipts.

Net FDI inflows at US$ 32.1 billion in April-December of 2019-20 were higher than US$ 24.3 billion in April-December of 2018-19.

Portfolio investment recorded a net inflow of US$ 15.1 billion in April-December of 2019-20 as against an outflow of US$ 11.9 billion a year ago.

In April-December 2019-20, there was an accretion of US$ 40.7 billion of the foreign exchange reserves (on a BoP basis).

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