Rise in imports widens India's Q2 CAD to $7.2 bn

An exponential rise in merchandise imports widened India's current account deficit (CAD) to $7.2 billion or 1.2 per cent of the GDP in the second quarter of 2017-18, from $3.4 billion reported in the corresponding period in 2016-17.

However, on a sequential basis, the Q2 CAD narrowed down sharply from $15 billion reported for the preceding quarter, the Reserve Bank of India's (RBI) data on Balance of Payments (BoP) showed on Wednesday.

"India's CAD at $7.2 billion (1.2 per cent of GDP) in Q2 of 2017-18 narrowed sharply from $15 billion (2.5 per cent of GDP) in the preceding quarter, but was substantially higher than $3.4 billion (0.6 per cent of GDP) in Q2 of 2016-17," the RBI said.

"The widening of the CAD on a year-on-year (y-o-y) basis was primarily on account of a higher trade deficit ($32.8 billion) brought about by a larger increase in merchandise imports relative to exports."

According to RBI's Q2 BoP data, net services receipts increased by 13.1 per cent on a y-o-y basis mainly on the back of a rise in net earnings from software services and travel receipts.

"Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $17.4 billion, increasing by 14.7 per cent from their level a year ago," the country's central bank said.

"In the financial account, net foreign direct investment at $12.4 billion in Q2 of 2017-18 moderated from its level in Q2 of 2016-17."

As per the data, during the quarter in consideration, there was a significant reduction in portfolio investment inflows at $2.1 billion, primarily "on account of net sale in the equity market" as compared to $6.1 billion in the same quarter a year ago.

"Net receipts on account of non-resident deposits amounted to US$ 0.7 billion in Q2 of 2017-18, lower than US$ 2.1 billion a year ago," the RBI said.

There was an accretion of $9.5 billion to India's foreign exchange reserves, as compared to $8.5 billion in the same quarter last year and $11.4 billion in the preceding quarter.

--IANS

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