At $6.3 billion, current account deficit dips to 0.9% of GDP

MUMBAI: The country’s current account deficit (CAD) narrowed to 0.9% of the gross domestic product (GDP) at $6.3 billion in the quarter ended September 2019 as imports slowed down due to lower demand. In the previous fiscal FY19, the CAD was 2.9% of GDP, or $19 billion, in the comparable quarter.
In the current fiscal’s preceding quarter ended June 2019, CAD was 2% of GDP or $14.2 billion.“The contraction in the CAD was primarily on account of a lower trade deficit at $38.1 billion as compared with $50 billion a year ago,” the RBI said in a statement.
India’s current account position is largely on a deficit because of the country’s dependence on oil imports. According to data released by the central bank, the net deficit due to oil imports shrunk to $19.3 billion from $23.5 billion.
The CAD is the difference between foreign exchange inflows and outflows. Private transfer receipts, mainly representing remittances by Indians employed overseas, rose to $21.9 billion, increasing by 5.2% from their level a year ago.
In the financial account, net foreign direct investment was $7.4 billion, almost the same level as in Q2 of 2018-19. Foreign portfolio investment recorded net inflows of $2.5 billion — as against an outflow of $1.6 billion in Q2 of FY19 — because of net purchases in the debt market. Net inflows on account of external commercial borrowings to India was $3.2 billion as compared with $2.0 billion in Q2 of 2018-19.
The balance of payment stood at $5.12 billion in the second quarter and $19.1 billion during the first half of this fiscal. The net inflow on account of external commercial borrowings to the country was $3.2 billion in the second quarter as compared with $2 billion in corresponding period of the previous financial year.