Current Account Balance Records A Surplus Of $5.7 Billion After 10 Quarters In Q4

India's current account balance recorded a surplus for the first time since April-June 2021, aided by lower merchandise trade deficit and higher services exports.

India's current account balance recorded a surplus of $5.7 billion (0.6% of GDP) during January-March 2024 quarter, as against a deficit of $8.7 billion (1% of GDP) in the preceding quarter and $1.3 billion (0.2% of GDP) in the same quarter a year ago, according to data published by the RBI on Monday.

• The merchandise trade deficit at $50.9 billion in March quarter was lower than $52.6 billion a year ago.

• Services exports grew by 4.1% on a yearly basis basis in the fourth quarter of fiscal 2024, driven by rising exports of software, travel and business services. Net services receipt at $42.7 billion was higher than its level a year ago ($39.1 billion), which contributed to the surplus in the current account balance during the fourth quarter of the previous fiscal.

• Net outgo on the primary income account, primarily reflecting payments of investment income, increased to $14.8 billion from $12.6 billion a year ago.

• Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $32.0 billion, an increase of 11.9% over their level a year ago.

• In the financial account, net foreign direct investment flows were $2.0 billion during March quarter as compared with $6.4 billion a year ago.

• Foreign portfolio investment recorded a net inflow of $11.4 billion in January-March period, as against a net outflow of $1.7 billion during the corresponding quarter a year ago.

• Net inflows under external commercial borrowings to India amounted to $2.6 billion in the March quarter, as compared with $1.7 billion a year ago.

• Non-resident deposits recorded a higher net inflow of $5.4 billion than $3.6 billion in the year-ago quarter.

• There was an accretion of foreign exchange reserves to the tune of $30.8 billion in the fourth quarter, as compared with an accretion of $5.6 billion a year ago.

For the full year, India’s current account deficit moderated to $23.2 billion (0.7% of GDP) during FY24 from $67 billion (2% of GDP) during the previous year on the back of a lower merchandise trade deficit.

For FY25, going by the early trends, the CAD should be manageable at 1-1.5% of GDP and the steady capital inflows should ensure that the balance of payments, which reflect the fundamentals remain comfortable, said Madan Sabnavis, chief economist at Bank of Baroda.

This will also keep rupee range-bound at 83-84 against the dollar, with external factors like strength of the dollar guiding the currency, he said.