By Swati Bhat
MUMBAI (Reuters) -India’s current account deficit narrowed sharply in the January to March quarter, helped by a smaller trade gap and increased services exports, the Reserve Bank of India (RBI) said on Wednesday.
The current account deficit (CAD) stood at $1.3 billion, or 0.2% of gross domestic product (GDP), in the fourth quarter of the 2022/23 fiscal year, compared with the previous quarter’s revised deficit of $16.8 billion, or 2% of GDP.
The deficit had stood at $13.4 billion in the same period a year earlier, the data showed.
The sequential decline was mainly on account of a moderation in the trade deficit to $52.6 billion in the fourth quarter of the financial year from $71.3 billion in the previous three months, coupled with robust services exports, the RBI said.
A Reuters survey of 22 economists suggested the current account balance was likely to have registered a surplus of $3.3 billion, or 0.4% of GDP, in the March quarter.
Forecasts ranged widely, from a deficit of $5 billion to a surplus of $7.8 billion.
“We expect CAD to improve further to below -1.5% of GDP in FY24. Lower commodity prices as well as robust services and remittances receipts are likely to cushion the impact of lacklustre growth in merchandise exports,” said Bank of Baroda economist Aditi Gupta.
India’s balance of payments stood at a surplus of $5.6 billion compared with a surplus of $11.1 billion in the preceding quarter and a deficit of $16 billion a year earlier.
Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $28.6 billion, up 20.8% from a year earlier.
For the 2022/23 fiscal year the current account balance showed a deficit of 2% of GDP versus a deficit of 1.2% in the preceding financial year as the trade deficit widened to $265.3 billion from $189.5 billion a year earlier.
In the financial account, net foreign direct investment stood at $6.4 billion. That compared with $2 billion in the preceding quarter but much lower than the $13.8 billion in the same period a year earlier.
For the March quarter, net foreign portfolio investment (FPI), however, showed a $1.7 billion outflow, mainly from the equities market.
“Even in the capital account, relief is likely as recent trends indicate steady inflows from FPIs. Hence, macro fundamentals make the case for a stronger rupee,” Bank of Baroda’s Gupta said.
(Additional reporting by Siddhi NayakEditing by Sudipto Ganguly, Clarence Fernandez and David Goodman)
