India's current account deficit narrows to 1.2% of GDO in Q2 of 2017-18

Current account deficit stood at 1.8% of GDP in H1 of 2017-18

India's current account deficit (CAD) at US$ 7.2 billion (1.2% of GDP) in Q2 of 2017-18 narrowed sharply from US$ 15.0 billion (2.5% of GDP) in the preceding quarter, but was higher than US$ 3.4 billion (0.6% of GDP) in Q2 of 2016-17.

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

Net services receipts increased by 13.1% 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 US$ 17.4 billion, increasing by 14.7% from their level a year ago.

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

Portfolio investment recorded net inflow of US$ 2.1 billion in Q2 of 2017-18, lower than US$ 6.1 billion in Q2 last year on account of net sale in the equity market.

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.

In Q2 of 2017-18, there was an accretion of US$ 9.5 billion to the foreign exchange reserves (on BoP basis) as compared with US$ 8.5 billion in Q2 of 2016-17 and US$ 11.4 billion in the preceding quarter.

BoP during April-September 2017 (H1 of 2017-18)

On a cumulative basis, the CAD increased to 1.8% of GDP in H1 of 2017-18 from 0.4% in H1 of 2016-17 on the back of widening of the trade deficit.

India's trade deficit increased to US$ 74.8 billion in H1 of 2017-18 from US$ 49.4 billion in H1 of 2016-17.

Net invisible receipts were higher in H1 of 2017-18 mainly due to increase in net services earnings and private transfer receipts.

Net FDI inflows during H1 of 2017-18 moderated by 6.3% over the level during the corresponding period of the previous year.

Portfolio investment recorded a net inflow of US$ 14.5 billion during H1 as compared with US$ 8.2 billion a year ago.

In H1 of 2017-18, there was an accretion of US$ 20.9 billion to foreign exchange reserves.

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