India's current account deficit narrows to 1.6% of GDP in Q3FY2015

There was a net accretion of US$ 13.2 billion to India's foreign exchange reserves in Q3 of 2014-15

India's current account deficit (CAD) narrowed to US$ 8.2 billion (1.6% of GDP) in Q3 of 2014-15 from US$ 10.1 billion (2.0% of GDP) in Q2 of 2014-15, while the CAD doubled from US$ 4.2 billion or 0.9% of GDP in Q3 of 2013-14.

The merchandise trade deficit (US$ 39.2 billion during Q3 2014-15) widened on a q-o-q basis on account of a larger decline in merchandise exports (7.3%) than in merchandise imports (4.5%); in terms of y-o-y changes too, the trade deficit in Q3 2014-15 widened due to a decline in exports (1.0%), while imports increased (4.5%).

Thus, the reduction in the CAD in Q3 2014-15 was primarily on account of net exports of services, which picked up in q-o-q terms on the back of an improvement in net earnings through travel and software services, and lower net outflows under primary income (profit, dividend and interest).

Gross private transfer receipts, representing remittances by Indians employed overseas, amounted to US $ 17.5 billion and provided sustained support to the BoP with a share of 12.6% of current receipts, broadly the same level as in the preceding quarter and a year ago.

In the financial account, net inflows of foreign direct and portfolio investment were somewhat lower on a q-o-q basis, though net loans availed by banks increased by US$ 6.6 billion mainly on account of inward repatriations of assets held abroad by banks; on a y-o-y basis, the level of net financial flows was broadly sustained - notwithstanding the inflows of US$ 21.4 billion garnered in Q3 of 2013-14 under the non-resident deposit schemes - with larger equity inflows relative to loans.

On a BoP basis, there was a net accretion of US$ 13.2 billion to India's foreign exchange reserves in Q3 of 2014-15, almost double the accretion in the preceding quarter, but lower than in Q3 of 2013-14, which was bolstered by special non-resident and banks' overseas borrowings.

Powered by Capital Market - Live News