India’s current account deficit widens to $9.7 billion in April-June

New Delhi: India’s s current account deficit (CAD)  widened marginally to $9.7 billion or 1.1 per cent of GDP in April-June 2024. It was at $8.9 billion or 1 per cent in the year-ago period. Data released by the Reserve Bank of India (RBI) showed this.

Current account deficit occurs when the value of goods and services imported and other payments exceeds the value of export of goods and services and other receipts by a country in a particular period. Trade deficit is the difference between imports and exports of the country.

As per data, strong domestic demand and weak outbound shipments resulted in a wider trade deficit. The crucial number representing the country’s external sector strength follows a surplus of $4.6 billion, or 0.5 per cent of GDP, recorded in the preceding January-March quarter.  The Reserve Bank attributed the year-on-year widening in current account deficit to a rise in merchandise trade gap which was recorded at $65.1 billion in Q1 FY25 as compared to $56.7 billion in the year-ago period.

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Net services receipts increased to $39.7 billion during the quarter under review from $35.1 billion a year ago.  Computer services, business services, travel services and transportation services have seen a rise.

The net foreign portfolio investment declined  to $ 0.9 billion from $15.7 billion in the year ago.Net inflows under external commercial borrowings (ECBs) came down to $1.8 billion during the first quarter, and was lower than $5.6 billion registered in the corresponding period a year ago.

The private transfer receipts increased to $29.5 billion in Q1 FY25, from $27.1 billion witnessed in the same period of last fiscal. Net foreign direct investment inflows increased to $6.3 billion from $4.7 billion on year.

Payments of investment income, captured under the net outgo on the primary income account, rose to $10.7 billion from the last year’s $10.2 billion.Non-resident deposits (NRI deposits) recorded net inflows of $4 billion, and was higher than $2.2 billion a year ago.

There was an accretion of $5.2 billion to the foreign exchange reserves on a BoP (balance of payments) basis in Q1 FY25 as compared to $24.4 billion in Q1 FY24.