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India's current account balance records surplus for Q4 of 2019-20

Capital Market 

Lower trade deficit and a sharp rise in net invisible receipts leads to surplus in current account

India's current account balance (CAB) recorded a marginal surplus of US$ 0.6 billion (0.1% of GDP) in Q4 of 2019-20 as against a deficit of US$ 4.6 billion (0.7% of GDP) in Q4 of 2018-19 and US$ 2.6 billion (0.4% of GDP) in the preceding quarter, i.e., Q3 of 2019-20.

The surplus in the current account in Q4 of 2019-20 was primarily on account of a lower trade deficit at US$ 35.0 billion and a sharp rise in net invisible receipts at US$ 35.6 billion as compared with the corresponding period of last year.

Net services receipts increased on the back of a rise in net earnings from computer and travel services on a year-on-year basis.

Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to US$ 20.6 billion, up by 14.8% from their level a year ago.

Net outgo from the primary income account, primarily reflecting net overseas investment income payments, decreased to US$ 4.8 billion from US$ 6.9 billion a year ago.

In the financial account, net foreign direct investment at US$ 12.0 billion was higher than US$ 6.4 billion in Q4 of 2018-19.

Foreign portfolio investment (FPI) declined by US$ 13.7 billion as against an increase of US$ 9.4 billion in Q4 of 2018-19 - on account of net sales in both the debt and equity markets.

Net inflow on account of external commercial borrowings to India was US$ 9.4 billion in Q4 of 2019-20 as compared with US$ 7.2 billion a year ago.

Owing to COVID-19 related uncertainty, net inflows under 'other capital' surged during the quarter, reflecting inter alia the FPIs' outstanding balances with custodian banks and pending issuance of shares by FDI companies.

There was an accretion of US$ 18.8 billion to the foreign exchange reserves (on a BoP basis) as compared with an accretion of US$ 14.2 billion in Q4 of 2018-19.

BoP during 2019-20

The CAD narrowed to 0.9% of GDP in 2019-20 from 2.1% in 2018-19 on the back of the trade deficit which shrank to US$ 157.5 billion in 2019-20 from US$ 180.3 billion in 2018-19.

Net invisible receipts were higher in 2019-20 mainly due to increase in net services earnings and private transfer receipts.

Net FDI inflows at US$ 43.0 billion in 2019-20 were higher than US$ 30.7 billion in 2018-19.

Portfolio investment increased by US$ 1.4 billion in 2019-20 as against an outflow of US$ 2.4 billion a year ago.

In 2019-20, there was an accretion of US$ 59.5 billion to foreign exchange reserves (on a BoP basis).

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(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, June 30 2020. 18:11 IST