Financially motivated 2020 start for economy! RBI reveals improved CAD to 0.9% of GDP in before last quarter

Mumbai, January 01: India’s current account deficit narrowed to 0.9 per cent of the Gross Domestic Product or $6.3 billion in the July-September quarter of the ongoing fiscal year from 2.9 per cent or $19 billion during the same time last year, according to data released by the Reserve Bank of India on Tuesday. The central bank had said in June that the country’s current account deficit had widened to 2.1 per cent of the GDP in in 2018-19.

 

“The contraction in the CAD was primarily on account of a lower trade deficit at US$ 38.1 billion as compared with US$ 50.0 billion a year ago,” the RBI release said. The Current Account Deficit is the net amount of foreign exchange inflows and outflows.

 

Net services receipts during the July-September quarter went up by 0.9 per cent on a year-on-year basis due to a rise in net earnings from computer, travel and financial services, the central bank said. “Private transfer receipts, mainly representing remittances by Indians employed overseas, rose to $21.9 billion, increasing by 5.2 per cent from their level a year ago,” RBI said. “In the financial account, net foreign direct investment was $7.4 billion, almost same level as in Q2 of 2018-19.”

 

Foreign portfolio investment recorded net inflow of $2.5 billion, as opposed to outflow of $1.6 billion in the same quarter of 2018-19 due to net purchases in the debt market. The net inflow of external commercial borrowings to India was $3.2 billion when compared to $2.0 billion in same period in the previous year.

 

“There was an accretion of $5.1 billion to the foreign exchange reserves (on BoP basis) as against a depletion of $ 1.9 billion in Q2 of 2018-19,” the RBI release added. The trade deficit for the January to March 2019 quarter stood at $35.2 billion as compared with $41.6 billion in the corresponding period a year ago, the central bank had earlier said.