India’s current account balance recorded a deficit of $23.9 billion, or 2.8% of GDP, in the first quarter of this fiscal year, compared with a surplus of $6.6 billion (0.9%) a year earlier, as per data released by the Reserve Bank of India (RBI) on Thursday.
“CAD will certainly widen further despite the moderation in crude oil prices,” said Rupa Rege Nitsure, chief economist at L&T Financial Holdings.
“India can attract more capital inflows if and only if it shows an improvement in growth prospects. Going by the underlying trends, India’s CAD may be 3.5-3.7% of GDP in FY23,” she added.
While debits were to the tune of $254.9 billion, credits totalled $231 billion.
Underlying the current account deficit was the widening of the merchandise trade deficit to $68.6 billion from $30.7 billion and an increase in net outgo of investment income payments.
Net services receipts increased, both sequentially and on a year-on-year (y-o-y) basis, on the back of rising exports of computer and business services.
Services exports grew 35.4%, led by broad-based growth in computer, business, transportation, and travel services, RBI data showed.
Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $25.6 billion, an increase of 22.6%.
Net outgo on the income account, primarily reflecting payments of investment income, increased to $9.3 billion from $7.5 billion.
In the financial account, net foreign direct investment increased to $13.6 billion from $11.6 billion.
Net foreign portfolio investment recorded outflows of $14.6 billion as against net inflows of $0.4 billion.
Net external commercial borrowings to India recorded an outflow of $3 billion as against an inflow of $0.2 billion.
Non-resident deposits recorded net inflows of $0.3 billion compared with $2.5 billion.
There was an accretion of $4.6 billion to the foreign exchange reserves (on a BoP basis) compared with $31.9 billion.
(With Reuters inputs)