The RBI has also showcased good numbers for the gross domestic product (GDP) and inflation.
For the quarter ending in June 2023 (Q1 FY24), India’s current account deficit (CAD) widened sequentially to $9.2 billion or 1.1% of the gross domestic product compared to $1.3 billion in Q4 FY23 (0.2% of GDP).
It is to be noted that in the year-ago period, the CAD was $17.9 billion, or 2.1% of the GDP.
On this development, the Reserve Bank of India, India’s central bank, in a statement said the quarter-on-quarter widening of CAD was on account of higher trade deficit coupled with a lower surplus in net services and decline in private transfer receipts.
The country’s trade deficit rose sequentially to $56.6 billion in April-June 2023 (Q1 FY24) from $52.6 billion in Q4 FY24.
The average merchandise trade deficit was higher in July-August 2023 compared to Q1 FY24. Experts have predicted that with crude oil prices rising, the CAD is estimated to widen sequentially to $19–21 billion in Q2 FY24.
The RBI said private transfer receipts, which mostly represent remittances by Indians employed overseas, moderated to $27.1 billion in Q1 FY24 from $28.6 billion in Q4 FY23 but witnessed an increase on a year-on-year basis.
The net outgo on the income account, primarily reflecting payments of investments, declined to $10.6 billion in Q1 FY24 from $12.6 billion in Q4 FY23, though higher than a year ago.
The RBI further highlighted that the net foreign portfolio investment had inflow of $15.7 billion in Q1 FY24 compared to net outflow of $14.6 billion in Q1 FY23. India’s net external commercial borrowings recorded an inflow of $5.6 billion in Q1 FY24 as against an outflow of $2.9 billion a year ago.
As for the balance of payments (BoP) in Q1FY24, there was a jump of $24.4 billion in reserves as against an accretion of $4.6 billion in the year-ago period, said the RBI.
The CAD is expected to be 1.5–1.8% of GDP in FY24) and it will depend on oil economics. CAD was 2.2% of GDP in FY23, data showed.