India’s Current Account Deficit Narrows To 0.2% Of GDP In Q4 FY23

The current account deficit continued to narrow in the January quarter amid lower merchandise trade deficit, coupled with robust services exports.

India’s current account deficit fell to $1.3 billion (0.2% of GDP) in Q4 of fiscal 2023 from $16.8 billion (2% of GDP) in Q3 FY23, and $13.4 billion (1.6% of GDP) a year ago.

The sequential decline in the CAD was mainly on account of a moderation in the trade deficit to $52.6 billion in Q4 FY23 from $71.3 billion in Q3, along with growth in services exports.

For the full fiscal, the current account balance recorded a deficit of 2% of GDP in FY23 as compared with a deficit of 1.2% in FY22, as trade deficit widened to $265.3 billion from $189.5 billion a year ago.

• Net services receipts increased, both sequentially and on a year-on-year basis, on the back of a rise in net earnings from computer services.

• Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $28.6 billion, up by 20.8% from a year ago.

• Net outgo on the primary income account, largely reflecting net income payments on foreign investment, increased on a year-on-year basis, while showing a marginal decline sequentially.

• In the financial account, net foreign direct investment at $6.4 billion was higher than $2.0 billion in Q3.

• Net foreign portfolio investment recorded an outflow of $1.7 billion–driven by the equity segment, as compared with an outflow of $15.2 billion during the corresponding period a year ago.

• Net external commercial borrowings to India recorded an inflow of $1.7 billion, as against an outflow of $2.5 billion during Q3.

• There was an accretion to the foreign exchange reserves (on a BoP basis) to the tune of $5.6 billion as against a depletion of $16 billion in Q4 FY22.