India's current account back to deficit in Q3FY2021 after 3 quarters of surplus

Capital account surplus improves to record high level in Q3FY2021

India's current account balance recorded a deficit of US$ 1.7 billion (0.2% of GDP) in Q3FY2021 after a surplus of US$ 15.1 billion (2.4% of GDP) in Q2FY2021 and US$ 19.0 billion (3.7% of GDP) in Q1FY2021; a deficit of US$ 2.6 billion (0.4% of GDP) was recorded a year ago [i.e. Q3FY2020].

Underlying the current account deficit in Q3FY2021 was a rise in the merchandise trade deficit to US$ 34.5 billion from US$ 14.8 billion in the preceding quarter, and an increase in net investment income payments.

Net services receipts increased, both sequentially and on a year-on-year basis, primarily on the back of higher net export earnings from computer services.

 

Private transfer receipts, mainly representing remittances by Indians employed overseas, declined marginally on a y-o-y basis but improved sequentially by 1.5% to US$ 20.7 billion in Q3FY2021.

Net outgo on the primary income account, primarily reflecting payments of investment income, increased to US$ 10.1 billion from US$ 7.4 billion a year ago.

In the financial account, net foreign direct investment (FDI) recorded robust inflow of US$ 17.0 billion as compared with US$ 9.7 billion in Q3FY2020.

Net foreign portfolio investment (FPI) was US$ 21.2 billion as compared with US$ 7.8 billion in Q3FY2020, primarily reflecting net purchases by foreign portfolio investors in the equity market.

With repayments exceeding fresh disbursals, external commercial borrowings to India recorded net outflow of US$ 1.7 billion in Q3FY2021 as against an inflow of US$ 3.2 billion a year ago.

Net accretions to non-resident deposits increased to US$ 3.0 billion from US$ 0.8 billion in Q3FY2020.

There was an accretion of US$ 32.5 billion to the foreign exchange reserves (on a BoP basis) as compared with that of US$ 21.6 billion in Q3FY2020.

BoP during April-December 2020

India recorded a current account surplus of 1.7% of GDP in April-December 2020 as against a deficit of 1.2% in April-December 2019 on the back of a sharp contraction in the trade deficit.

Net invisible receipts were lower in April-December 2020 due to a moderation in net private transfer receipts and an increase in investment income payments.

Net FDI inflows at US$ 40.8 billion in April-December 2020 were higher than US$ 31.1 billion in April-December 2019.

Net FPI inflows stood at US$ 28.9 billion in April-December 2020, higher than US$ 15.1 billion a year ago.

In April-December 2020, there was an accretion of US$ 83.9 billion to the foreign exchange reserves (on a BoP basis).

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