Current account deficit narrows in 2016-17: RBI

India's current account deficit (CAD) narrowed during the last fiscal due to a contraction in the country's trade deficit, the country's central bank said on Thursday.

According to data furnished by the Reserve Bank of India (RBI), the CAD for last fiscal narrowed to 0.7 per cent of the GDP (Gross Domestic Product) from 1.1 per cent in 2015-16 on the back of the contraction in trade deficit.

The current account is the net difference between inflows and outflows of foreign currencies.

India's trade deficit during the fiscal under review narrowed to $112.4 billion in 2016-17 from $130.1 billion in 2015-16.

"Net invisible receipts were lower, mainly due to moderation in both software exports and net private transfer receipts, and higher outgo on account of primary income (profit, interest and dividends)," the RBI said in a statement.

However, the data showed that net FDI (Foreign Direct Investment) inflows in 2016-17 marginally declined to $35.6 billion from $36 billion reported during 2015-16.

In contrast, portfolio investment recorded a net inflow of $7.6 billion in 2016-17 as against an outflow of $4.5 billion.

The foreign exchange reserves (on BoP basis) increased by $21.6 billion as against an accretion of $17.9 billion.

On the quarterly basis, the data showed that the country's CAD rose to $3.4 billion during the fourth quarter (January-March) of 2016-17 from $0.3 billion in the like quarter of 2015-16.

"The widening of the CAD on a year-on-year (y-o-y) basis was primarily on account of a higher trade deficit ($29.7 billion) brought about by a larger increase in merchandise imports relative to exports," the RBI said.

The CAD for Q4 accounted for 0.6 per cent of the GDP as against 0.1 per cent of the GDP in the like quarter of 2015-16.

"Net services receipts increased on a y-o-y basis on the back of a rise in net earnings from travel, transport, construction and other business services," the statement said.

"Private transfer receipts, mainly representing remittances by Indians employed overseas, at $15.7 billion remained almost at the same level as in the preceding year."

In the financial account, net foreign direct investment at $5 billion in Q4 of 2016-17 was lower than its level during a year ago period.

Conversely, there has been net inflow of portfolio investment to the tune of $10.8 billion as against net inflow of $1.5 billion during Q4 2015-16; portfolio inflows occurred in both equity and debt segments.

In Q4 of 2016-17, foreign exchange reserves (on BoP basis) increased by $7.3 billion as against an accretion of $3.3 billion during the like period of 2015-16.