India’s current account deficit widens to 2.8% of GDP in Q1FY23: RBI
India’s current account deficit, a key indicator of the balance of payment position, widened to 2.8 per cent of GDP at $23.9 billion in the first quarter of the current financial year, mainly on account of a higher trade deficit.
As per the data released by the Reserve Bank on India’s Balance of Payments during the First Quarter (April-June) of 2022-23, the current account balance recorded a deficit of $23.9 billion (2.8 per cent of GDP) in the first quarter, up from $13.4 billion (1.5 per cent of GDP) in January-March period of the last fiscal.
The CAD stood at $13.4 billion, or 1.5% of GDP, in the preceding January-March quarter, while there had been a surplus of $6.6 billion, or 0.9% of GDP, in the same quarter a year earlier, the release showed.
“Underlying the current account deficit in Q1:2022-23 was the widening of the merchandise trade deficit to $68.6 billion from $54.5 billion in Q4:2021-22 and an increase in net outgo of investment income payments,” the RBI said.
It also said net services receipts increased, both sequentially and on a year-on-year (y-o-y) basis, on the back of rising exports of computer and business services.
Private transfer receipts, mainly representing remittances by Indians employed overseas, rose 22.6% to $25.6 billion from a year earlier, the RBI said.
India’s merchandise trade deficit in August widened to $27.98 billion from $11.71 billion a year earlier, revised data released by the government earlier this month showed.
Another key reason for the rise in the CAD was an increase in net outgoing investment income payments, which increased to $9.3 billion from $7.5 billion a year ago, the release said.
“CAD will certainly widen further despite the moderation in crude oil prices,” said Rupa Rege Nitsure, chief economist at L&T Financial Holdings.
“India can attract more capital inflows if and only if it shows an improvement in growth prospects. Going by the underlying trends, India’s CAD may be 3.5-3.7% of GDP in FY23,” she added.
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