CAD narrows to 0.9% as trade deficit shrinks
Mumbai: India's current account deficit (CAD) narrowed to 0.9 per cent of GDP, or $6.3 billion, in the September 2019 quarter, on account of lower trade deficit. It had stood at 2.9 per cent of gross domestic product (GDP), or $19 billion, in the corresponding quarter of 2018-19.
On a sequential basis, CAD had printed 2 per cent of GDP, or $14.2 billion, in the June 2019 quarter. The current account deficit is the difference between foreign exchange inflows and outflows.
"The contraction in the CAD was primarily on account of a lower trade deficit at $38.1 billion as compared with $50 billion a year ago," the Reserve Bank of India (RBI) said in a release on Tuesday.
During the first half of the current financial year, CAD narrowed to 1.5 per cent of GDP from 2.6 per cent in the corresponding period in 2018-19, on the back of a reduction in the trade deficit, which shrank to $84.3 billion as compared with $95.8 billion a year ago.
The trade deficit is the gap between the value of imports and exports. The balance of payment stood at $5.12 billion in the second quarter and $19.10 billion during the first half of this fiscal. Net foreign direct investment stood at $7.4 billion, almost the same level as in second quarter of 2018-19.
Helped by net purchases in the debt market, foreign portfolio investment recorded a net inflow of $2.5 billion in the September 2019 quarter, against an outflow of $1.6 billion a year ago.
In the April-September 2019 period, while the net FDI inflows were at $21.2 billion, portfolio investment recorded a net inflow of $7.3 billion.
Net services receipts increased 0.9 per cent on in July-September on a y-o-y basis, on the back of a rise in net earnings from computer, travel and financial services, the RBI said.
In the second quarter of 2019-20, private transfer receipts, mainly representing remittances by Indians employed overseas, rose to $21.9 billion, an increase of 5.2 per cent as against a year ago.
The net inflow on account of external commercial borrowings to the country was $3.2 billion in the second quarter as compared with $2 billion in corresponding period of the previous financial year. There was a growth of $5.1 billion in the foreign exchange reserves in the September 2019 quarter, compared with a depletion of $1.9 billion a year ago. During the first half of 2019-20, there was an accretion of $19.1 billion of the foreign exchange reserves, the RBI said.