India’s current account deficit (CAD) declined sharply to 1 per cent of the GDP or $8.3 billion in the second quarter of this financial year ended September 2023, mainly due to lower merchandise trade deficit and growth in services exports, according to the latest RBI data released on Tuesday.
The current account deficit (CAD) had stood at 3.8 per cent of GDP or $30.9 billion in the July-September quarter of 2022-23.
CAD was USD 9.2 billion or 1.1 per cent of GDP in the first quarter (April-June) of the current financial year 2023-24. “Underlying the lower current account deficit on a year-on-year (y-o-y) basis in Q2:2023-24 was the narrowing of merchandise trade deficit to USD 61.0 billion from USD 78.3 billion in Q2:2022-23,” said the data on Developments in India’s Balance of Payments during the second quarter (July-September) of 2023-24.
Services exports grew by 4.2 per cent on a y-o-y basis on the back of rising exports of software, business and travel services, the Reserve Bank said. Net services receipts increased both sequentially and on a y-o-y basis, it added.
Aditi Nayar, chief economist and head (research and outreach) at ICRA, said, “India’s current account deficit for Q2 FY2024 printed at $8.3 billion, well below our expectation of around $13 billion, led primarily by a smaller-than-anticipated merchandise trade deficit.”
She added that following the expansion in the merchandise trade deficit in October 2023, the CAD for the ongoing quarter is expected to widen appreciably, to around $18-20 billion.
“Nevertheless, we now foresee the FY2024 CAD in a range of 1.5-1.6 per cent of GDP, unless commodity prices chart a sharp rebound,” Nayar said.
(With PTI Inputs)
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