India’s Current Account Deficit (CAD) Rises to 1.1% of GDP in Q3 FY25

India’s current account deficit (CAD) widened to $11.5 billion (1.1% of GDP) in Q3 FY25 (Oct-Dec 2024) due to a higher merchandise trade deficit, according to the Reserve Bank of India (RBI). However, CAD moderated from $16.7 billion (1.8% of GDP) in Q2 FY25. Foreign exchange reserves have increased by $311 billion since December 2018, marking the largest jump under any RBI Governor. The balance of payments (BoP) saw a depletion of $37.7 billion, contrasting with an accretion of $6 billion in Q3 FY24. The full-year CAD for FY25 is expected to be around 0.8% of GDP.

Key Highlights of CAD in Q3 FY25

1. Current Account Deficit (CAD) Trends

• CAD increased to $11.5 billion (1.1% of GDP) in Q3 FY25, from $10.4 billion (1.1% of GDP) in Q3 FY24.
• CAD moderated from $16.7 billion (1.8% of GDP) in Q2 FY25.
• FY25 full-year CAD is estimated at 0.8% of GDP, expected to slightly increase to 1.0% in FY26.

2. Merchandise Trade Deficit

• Increased to $79.2 billion in Q3 FY25, up from $71.6 billion in Q3 FY24.
• Expected to narrow in Q4 FY25 due to a seasonal uptick in exports.

3. Foreign Exchange Reserves

• Forex reserves have increased by $311 billion since December 2018.
• Largest forex jump under any RBI Governor.

4. Balance of Payments (BoP)

• Depletion of $37.7 billion in Q3 FY25, compared to an accretion of $6 billion in Q3 FY24.
• CAD for April-December FY25 stood at $37 billion (1.3% of GDP) vs. $30.6 billion (1.1% of GDP) in FY24.

5. Key Components of the Current Account

• Net services receipts increased to $51.2 billion in Q3 FY25, up from $45 billion in Q3 FY24.
• Private transfer receipts (remittances) rose to $35.1 billion, compared to $30.6 billion in Q3 FY24.
• Primary income outgo (investment income payments) increased to $16.7 billion, from $13.1 billion in Q3 FY24.
• NRI deposits net inflow stood at $3.1 billion, down from $3.9 billion a year ago.
• Foreign Portfolio Investment (FPI) saw net outflows of $11.4 billion, as opposed to $12 billion inflows in Q3 FY24.
• External Commercial Borrowings (ECBs) recorded net inflows of $4.3 billion, compared to outflows of $2.7 billion a year earlier.