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CAD increases to 2.1% of GDP in FY19; but more than halves in Q4

Overall trade performance was the prime influencer for both the contraction in CAD for the March quarter as well as a widening for the full year

Press Trust of India  |  Mumbai 

current account deficit, government policies
Illustration by Ajay Mohanty

(CAD) increased to $57.2 billion or 2.1 per cent of GDP in FY19 as against 1.8 per cent in the previous year, the Reserve Bank said Friday.

The CAD, which is the net of foreign exchange inflows and outflows, had stood at $48.7 billion in FY18.

For FY19, the deficit widened despite a narrowing of the same in the March quarter to 0.7 per cent of GDP or $4.6 billion, as against $27.7 billion or 2.7 per cent in the December quarter and $13 billion or 1.8 per cent in the March 2018 quarter, the central bank data showed.

Overall trade performance was the prime influencer for both the contraction in CAD for the March quarter as well as a widening for the full year.

A lower trade deficit of $35.2 billion in the March quarter, compared to $41.6 billion in the year-ago period helped in CAD contraction, it said.

Similarly, an increase in trade deficit to $180.3 billion for the year as a whole as against $160 billion in the year-ago period led to the widening of the CAD in FY19, the central bank said.

Net services receipts increased 5.8 per cent to $21.3 billion on the back of a rise in net earnings from telecommunications, computer and information services during the March quarter.

Private transfer receipts, representing mainly the remittances by expat Indians, declined by 0.9 per cent to $17.9 billion in the March quarter, it said.

It can be noted that inflows from the diaspora have been increasing for many years now, making the country the biggest beneficiary of remittances globally.

The net foreign direct investment stood at $6.4 billion in March quarter, the same level as the year-ago period, and rose marginally to $30.7 billion for the year as a whole.

Foreign portfolio investment recorded net inflow of $9.4 billion in March quarter versus $2.3 billion in the year-ago period on account of net purchases in both debt and equity markets, the RBI said.

However, for the entire year as a whole, net FPI flows dipped sharply to $2.4 billion as against $22.1 billion in the year-ago period.

The net inflows on account of external commercial borrowings jumped to $7.2 billion in the March quarter from $1 billion a year ago.

From a forex reserves perspective, there was a $3.3 billion depletion during the year, the central bank said.

First Published: Fri, June 28 2019. 18:27 IST
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