India's current account deficit narrows sharply to $0.3 bn on lower trade deficit

Mumbai: India’s current account deficit (CAD) narrowed sharply to USD 0.3 billion, or 0.1 per cent of GDP, in the fourth quarter of 2015-16 from USD 7.1 billion, or 1.3 per cent, in third quarter, on account of lower trade gap. For the entire 2015-16 fiscal, CAD – the difference between the inflow and outflow of foreign exchange – shrank to 1.1 per cent of the GDP.

“CAD narrowed sharply to USD 0.3 billion, or 0.1 per cent of GDP, in Q4 FY2015-16, significantly lower than USD 7.1 billion, or 1.3 per cent, in Q3 and marginally lower than USD 0.7 billion, or 0.1 per cent, in Q4 FY2014-15,” the Reserve Bank said today.

The contraction in CAD in the fourth quarter of the last fiscal was primarily on account of lower trade deficit, which stood at USD 24.8 billion compared to USD 31.6 billion in the corresponding quarter a year ago.

For the full fiscal 2015-16, CAD stood at 22.1 billion, or 1.1 per cent of GDP, as against USD 26.9 billion, or 1.8 per cent of GDP, in 2014-15, on the back of contraction in the trade deficit.

The country’s trade deficit narrowed to USD 130.1 billion last fiscal from USD 144.9 billion in 2014-15.

The overall Balance of Payment (BoP) during the fiscal moderated to USD 17.9 billion from USD 61.06 billion in 2014-15.

During the fiscal, there was decline in net invisible receipts, reflecting moderation in both net services earnings and private transfer receipts.

Net FDI inflows during the last fiscal stood at USD 36 billion, up sharply by 15.3 per cent over the level in 2014-15, the apex bank said.

Portfolio investment, however, recorded a net outflow of USD 4.5 billion during the fiscal as against a net inflow of USD 40.9 billion in 2014-15.

In 2015-16, there was an accretion of USD 17.9 billion to foreign exchange reserves (on BoP basis) as compared with USD 61.4 billion in 2014-15, RBI said.