Q3 current account deficit has narrowed to 1.3% of GDP: RBI

India’s current account deficit (CAD) narrowed to 1.3 per cent of GDP in third quarter of the fiscal as against 1.5 per cent in the same period last year, mainly on account of lower trade deficit.

“India’s CAD at $7.1 billion (1.3 per cent of GDP) in Q3 of 2015-16 was lower than $7.7 billion (1.5 per cent of GDP) in Q3 of 2014-15 and $8.7 billion (1.7 per cent of GDP) in the preceding quarter,” the Reserve of India said.

While releasing the Balance of Payments data during the October-December quarter of 2015-16, it said the contraction in CAD was primarily on account of a lower trade deficit ($34 billion) as against in Q3 of last year ($38.6 billion) and $37.4 billion in the preceding quarter. On a cumulative basis, the CAD narrowed to 1.4 per cent of GDP in April-December from 1.7 per cent in the corresponding period of 2014-15, on the back of the contraction in the trade deficit.

RBI further said net services receipts moderated on a year-on-year basis largely due to fall in export receipts in transport and financial services, though there has been a marginal improvement over the preceding quarter.

Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $15.8 billion, a decline from their level in the preceding quarter as well as from a year ago.

The central bank also said that after moderating in second quarter, net foreign direct investment again picked up and stood at $10.8 billion in third quarter. “Non-resident Indian deposits moderated significantly in Q3 of 2015-16 over their level in Q3 last year as well as the preceding quarter,” RBI said.

Foreign exchange reserves (on a BoP basis) increased by $4.1 billion in third quarter of 2015-16. During April-December, there was an accretion of $14.6 billion to foreign exchange reserves (on a BoP basis) compared with $31.3 billion in the corresponding period of 2014-15.

RBI also said there has been a marginal net outflow of $0.2 billion in portfolio investment in third quarter of 2015-16 as against net outflow of $3.5 billion in the preceding quarter and “equity outflows in Q3 were almost offset by inflows into the debt segment”.

Meanwhile, the Centre on Monday urged exporters to take advantage of Free Trade Agreements (FTAs) with other countries and assured its support in leveraging such trade pacts. “India’s Free Trade Agreements (FTAs) with various countries are not being leveraged fully by Indian exporters.

Our department is ready to assist our exporters in leveraging these FTAs better,” Commerce Secretary Rita Teaotia said after inaugurating ‘CAPINDIA 2016’ exhibition here.

India has signed FTAs with several countries to reduce trade barriers, including import quotas and tariffs, and to increase trade of goods and services. “The total global imports for chemical products are estimated at about $2 trillion. Our present world share is about 1.8 per cent which is an indicator of the immense opportunities which are out there for growth of exports. The initiatives are aimed at targeting the world as our market,” Teaotia added.

Israel-based importer Gas Technologies and Chemicals’ Eyal Dayan said, “Consistency of quality is very important to us. We find this as a major challenge in countries such as China. European exporters are often not keen on smaller quantities. Not only do we get more consistent quality, the price advantage has been a traditional strength in India.”