Current Account Deficit Widens to $9.7 Billion in April-June Quarter

In the April-June 2024 quarter, India’s current account deficit (CAD) increased to $9.7 billion, or 1.1% of GDP, up from $8.9 billion (1% of GDP) in Q1 FY2024, according to the Reserve Bank of India (RBI). This marginal widening is attributed to a rise in the merchandise trade deficit, which expanded to $65.1 billion from $56.7 billion in the previous year. The CAD had recorded a surplus of $4.6 billion (0.5% of GDP) in the previous January-March quarter.

Merchandise Trade and Services

The primary factor behind the widening CAD is the merchandise trade deficit. However, net services receipts saw an increase to $39.7 billion from $35.1 billion a year ago, driven by growth in sectors like computer services, business services, travel, and transportation.

Foreign Investments and Borrowings

Foreign direct investment (FDI) inflows rose to $6.3 billion from $4.7 billion, while foreign portfolio investment (FPI) declined sharply to $0.9 billion from $15.7 billion. Net inflows under external commercial borrowings (ECBs) also dropped to $1.8 billion from $5.6 billion in the same period last year.

Remittances and Deposits

Private transfer receipts, representing remittances by Indians abroad, grew to $29.5 billion from $27.1 billion a year ago. Non-resident deposits (NRI deposits) saw net inflows of $4 billion, a notable increase from $2.2 billion in the corresponding period last year.

Forex Reserves and Investment Income

India’s foreign exchange reserves increased by $5.2 billion in Q1 FY25, compared to a larger $24.4 billion accretion in Q1 FY24. Payments of investment income, captured under net outgo on the primary income account, rose slightly to $10.7 billion from $10.2 billion a year ago.