Current account deficit narrows to 0.9% of GDP in July-September quarter on lower trade deficit: RBI

In the first half of the current fiscal, the CAD narrowed to 1.5 percent of GDP from 2.6 percent in the same period in FY2018-19 on the back of a reduction in the trade deficit.

Press Trust of India December 31, 2019 18:40:07 IST
Current account deficit narrows to 0.9% of GDP in July-September quarter on lower trade deficit: RBI
  • In the first quarter, the deficit stood at 2% of Gross Domestic Product 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

  • Trade deficit shrank to $84.3 billion in the first half of FY2019-20 from $95.8 billion last year

Mumbai: The current account deficit (CAD) narrowed to 0.9 percent of GDP or $6.3 billion in the July-September quarter of the current fiscal from 2.9 percent or $19 billion in same period last year, according to the RBI data.

In the first quarter, the deficit stood at 2 percent of Gross Domestic Product (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," RBI said in a release.

Current account deficit narrows to 09 of GDP in JulySeptember quarter on lower trade deficit RBI

Representational image. News 18.

In the first half of the current fiscal, the CAD narrowed to 1.5 percent of GDP from 2.6 percent in the same period in FY2018-19 on the back of a reduction in the trade deficit.

Trade deficit shrank to $84.3 billion in the first half of FY2019-20 from $95.8 billion last year, the RBI said.

Net foreign direct investment stood at $7.4 billion, almost the same level as in second quarter of 2018-19.

Helped by net purchases in the debt market, foreign portfolio investment recorded a net inflow of $2.5 billion in the September 2019 quarter, against an outflow of $1.6 billion a year ago.

In the April-September 2019 period, while the net foreign direct investment (FDI) inflows were at $21.2 billion, portfolio investment recorded a net inflow of $7.3 billion. Net services receipts increased 0.9 percent on in July-September on a y-o-y basis, on the back of a rise in net earnings from computer, travel and financial services, the RBI said.

There was a growth of $5.1 billion in the foreign exchange reserves in the September 2019 quarter, compared with a depletion of $1.9 billion a year ago.

During the first half of 2019-20, there was an accretion of USD 19.1 billion of the foreign exchange reserves, the RBI said.

The “trade deficit is lower primarily because imports have fallen at a faster rate than exports due to weak manufacturing activity and lower imports of raw materials and capital goods,” said Rupa Rege Nitsure, chief economist at L&T Financial Services.

Data last month showed annual economic growth slowed to 4.5 percent in the September quarter, its weakest pace since 2013.

The current account deficit stood at $6.3 billion in the September quarter versus $19 billion a year ago. The merchandise trade deficit narrowed to $38.1 billion from $50.0 billion, the central bank said.

Balance of payments, the difference between the current account and capital account, stood at a surplus of $5.1 billion in the September quarter compared with a deficit of $1.9 billion a year ago, data showed. However, the narrowed from $14 billion seen in the June quarter.

Net inflow on account of external commercial borrowings (ECBs) stood at $3.2 billion compared with $2 billion last year. Net foreign direct investment was largely unchanged at $7.4 billion.

Private transfer receipts, mainly representing remittances by Indians employed overseas, rose to $21.9 billion, up 5.2 percent from a year ago, the data showed.

“Both the critical components of foreign exchange reserves — exports and FDI — have not shown any improvement Y-O-Y. On the other hand, portfolio inflows (hot money) and ECBs (debt capital) have increased significantly. This kind of improvement is not sustainable,” L&T’s Nitsure said.

With Reuters inputs

Updated Date:

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