India's CAD triples to 1.9% in Q4 year-on-year, pegged at 1.6% in FY18

RBI said the widening of the CAD on a year-on-year (y-o-y) basis in fourth quarter was primarily due to a higher trade deficit ($41.6 billion) brought about by a larger increase in merchandise import.

Trade deficit

The country’s current account deficit (CAD) rose to $13 billion (Rs 878 billion and 1.9 per cent of gross domestic product, or GDP) in the fourth and final quarter (Q4 of 2017-18), compared to $2.6 billion (Rs 176 billion and 0.4 per cent of GDP) in the same period of 2016 -17.

It, however, moderated marginally from $13.7 billion (2.1 per cent of GDP) in the third quarter (October to December 2017), stated the Reserve Bank of India.  

For the full financial year (2017-18), the deficit increased to 1.9 per cent of GDP, from 0.6 per cent in 2016-17. The trade deficit rose to $160 billion, from $112.4 billion in 2016-17.

Net services receipts increased by 8.8 per cent over the year; software earnings was a contributor. Private transfer receipts, mainly remittances by Indians working abroad, were $18.1 billion, a rise of 15.1 per cent from a year before.

In the financial account, net foreign direct investment was $6.4 billion in Q4, from $5 billion in the same quarter of 2016-17. Portfolio investment recorded a net inflow of $2.3 billion in Q4, well down from an inflow of $10.8 billion a year before, with moderation in net purchases seen in both the debt and equity markets.

Net receipts on account of non-resident deposits amounted to $4.6 billion in Q4, compared to $2.7 billion a year before.

The quarter also saw an accretion of $13.2 billion to the foreign exchange reserves as compared with one of $7.3 billion in Q4 of 2016-17.  The accretion was $43.6 billion for the entire year.

During 2017-18, net invisible receipts (from trade in ‘invisible’ services, instead of ‘visible’ goods) were higher.

Gross foreign direct investment (FDI) rose marginally to $61 billion in 2017-18, from $60.2 billion in 2016-17. Net FDI moderated to $30.3 billion, from $35.6 billion the previous year. 

Portfolio investment had net inflow of $22.1 billion in 2017-18, as compared with $7.6 billion a year before.