India not alone in exhibiting improving current account balance numbers

India had seen an improvement in its current account balance in the March 2023 quarter

India is not alone in exhibiting improving current account balance numbers so far this year.

Brazil and the United States are those showing improvement in the first quarter of 2023, among key peers for whom data is available from the Paris-based Organisation for Economic Co-operation and Development (OECD).

India’s current account deficit (CAD) declined to 0.2 per cent of gross domestic product (GDP) in March 2023, compared to 2 per cent in the previous quarter, according to the data released by Reserve Bank of India (RBI) on Tuesday. The current account balance is broadly a measure of money flowing in and out of the country through trade and other means. It is measured relative to economic size as measured by gross domestic product (GDP). A deficit would suggest more money flowing out than is coming in.

The US had recorded a current account deficit of 3.3 per cent of GDP in the first quarter of 2023. The deficit was 4.6 per cent of GDP a year ago. Similarly, Brazil’s current account deficit narrowed to 0.8 per cent of GDP in the beginning of 2023, from a 2.7 per cent in the first quarter of 2022. Indonesia showed an improvement in its current account balance, while Japan and South Korea showed a decline (chart 1). 

 Available forecasts suggest that the trend may continue into 2024. Brazil’s current account deficit is expected to narrow to 1.8 per cent of GDP in 2024 from 2.9 per cent deficit in 2022. India’s deficit is expected to halve to 1.3 per cent of GDP in 2024 from its 2022 figure equivalent to 2.6 per cent of GDP. An improvement is also expected in the US. Indonesia’s current account surplus is expected to decline, which is also the case with South Korea (chart 2).

The fall in India’s current account was due to the improvement in the trade deficit from $71.3 billion in quarter three of 2022-23 to $52.6 billion in the fourth quarter of 2022-23, according to the RBI.