India’s Current Account Deficit Soars to 4-Year High of $14.3 Bn

The country’s balance of payments for the first quarter of 2017-18 stood at $11.40 billion.

(Photo: Reuters)

An exponential increase in merchandise imports during the first quarter (April-June) of 2017-18 pushed India's current account deficit (CAD) higher to $14.3 billion, or 2.4 percent of the GDP, from $0.4 billion reported for the same period of 2016-17.

According to data released by the RBI on Friday, Q1 CAD was even higher than the fourth quarter 2016-17 deficit of $3.4 billion.

Also Read: Some Achhe Din on CAD Front for Fourth Quarter

India’s CAD at $14.3 billion (2.4 percent of GDP) in Q1 of 2017-18 increased sharply from $0.4 billion (0.1 percent of GDP) in Q1 of 2016-17, and $3.4 billion (0.6 percent of GDP) in Q4 of 2016-17. The widening of the CAD on a year-on-year basis was primarily on account of a higher trade deficit ($41.2 billion) brought about by a larger increase in merchandise imports relative to exports.

Reserve Bank of India

Net services receipts rose by 15.7 percent on a year-on-year basis owing to a a rise in net earnings from travel, construction and other business services.

During the quarter in consideration, net FDI at $7.2 billion in almost doubled from the level in the same period last year.

During the first quarter there was a significant inflow of net portfolio investment at $12.5 billion, primarily in the debt segment, as compared to $2.1 billion in the same quarter a year ago.

Private transfer receipts, mostly representing remittances by Indians working overseas, at $16.1 billion, increased by 5.3 percent over the corresponding quarter of last year.

The country's balance of payments for the quarter in question stood at $11.40 billion, up from $6.969 billion in the same period a year ago.

There was an accretion of $11.4 billion to India's foreign exchange reserves, as compared to $7 billion in the same quarter last year and $7.3 billion in the fourth quarter of the last fiscal ended March.

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