CAD narrows sharply to 1.7% in first quarter

Written by Press Trust of India | New Delhi | Updated: Sep 2 2014, 05:49am hrs
India's current account deficit narrowed sharply to 1.7% of GDP in the April-June quarter of this fiscal mainly on account of reduction in trade deficit, and a steep decline in gold imports. "The lower CAD was primarily on account of a contraction in the trade deficit contributed by both a rise in exports and a decline in imports," RBI said.

CAD narrowed sharply to $7.8 billion (1.7% of GDP) in the first quarter of the 2014-15 fiscal, from $21.8 billion (4.8% of GDP) in the year-ago period. However, it was higher than $1.2 billion (0.2% of GDP) in the fourth (January-March) quarter of the previous fiscal, 2013-14.

Decline in imports was primarily led by a steep 57.2% fall in gold imports, which amounted to $7 billion significantly lower than $16.5 billion in the April-June quarter of 2013-14, RBI said.

Trade deficit contracted by about 31.4% to $34.6 billion in Q1 2014-15, from $50.5 billion in Q1, 2013-14.

Exports increased by 10.6% in the first quarter of 2014-15 to $81.7 billion. Imports moderated by 6.5% to $116.4 billion.

Balance of payments surplus for third straight quarter

As per the Balance of Payments (BoP) data released on Monday, on net basis, both FDI and portfolio investment recorded inflows in the first quarter of 2014-15. While net inflow on account of portfolio investment was $12.4 billion, net FDI inflow was substantially higher at $8.2 billion.

"There was a net accretion of $11.2 billion to India's foreign exchange reserves in first quarter of 2014-15 as against a draw down of $0.3 billion in Q1 of 2013-14," RBI said. This is the third straight quarter in which there has been a net addition to foreign exchange reserve, reflecting an improvement in the BoP situation.