India’s current account balance moved into deficit (CAD) sequentially to $9.7 billion in the April-June quarter (Q1) of 2024-25 (FY25), accounting for 1.1 per cent of the gross domestic product (GDP). The current account balance was in surplus to the tune of $4.6 billion in January-March 2024 (Q4FY24), which represented 0.5 per cent of GDP. In the year-ago period, the current account deficit (CAD) was $8.9 billion, or 1 per cent of GDP.
The Reserve Bank of India (RBI), in a statement, said the CAD widened on a year-on-year (Y-o-Y) basis, primarily due to a rise in the deficit in merchandise trade to $65.1 billion in Q1FY25 from $56.7 billion in Q1FY24.
Aditi Nayar, chief economist at ICRA, said, “While the current account deficit expectedly widened in Q1 FY25, it undershot our forecast primarily on account of secondary income.”
Looking ahead, the spike in gold imports in August 2024, following the customs duty reduction, is likely to bloat this quarter’s CAD considerably to nearly 2.0 per cent of GDP, Nayar added.
Net services receipts increased Y-o-Y to $39.7 billion in Q1FY25 from $35.1 billion a year ago. Services exports rose on a Y-o-Y basis across major categories such as computer services, business services, travel services, and transportation services.
The RBI said private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $29.5 billion in Q1FY25 from $27.1 billion in Q1FY24.
The net outgo on the income account, primarily reflecting investment payments, increased to $10.7 billion in Q1FY25 from $10.2 billion in Q1FY24.
Net inflows under foreign portfolio investment nosedived to $0.9 billion in Q1FY25 from $15.7 billion in Q1FY24.
Additionally, net external commercial borrowings to India recorded an inflow of $1.8 billion in Q1FY25, as against an inflow of $5.6 billion a year ago.
In Q1FY25, concerning the balance of payments (BoP) position, there was an accretion of $5.2 billion to reserves, compared to an accretion of $24.4 billion in the same period last year, the RBI said.
First Published: Sep 30 2024 | 8:05 PM IST
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