1. CAD worsens a shade to 1.6% of GDP

CAD worsens a shade to 1.6% of GDP

India’s current account deficit (CAD) for the three months to September came in at $8.2 billion or 1.6% of GDP, a shade worse than the $6.2 billion or 1.2% of GDP seen in Q1FY16, reports fe Bureau in New Delhi.

By: | New Delhi | Published: December 23, 2015 12:58 AM

India’s current account deficit (CAD) for the three months to September came in at $8.2 billion or 1.6% of GDP, a shade worse than the $6.2 billion or 1.2% of GDP seen in Q1FY16, reports fe Bureau in New Delhi. The sequential expansion in the CAD resulted from a combination of a slight rise in the merchandise deficit to $37.4 billion and only a modest increase in services receipts at close to $18 billion.

On the capital account, foreign direct investment has unfortunately seen a sharp fall to $8.2 billion from $11.5 billion in Q1FY16; even seen on a year-on-year basis, FDI was lower. That apart, foreign portfolio flows were weaker — while in Q1FY16 outflows were of the order of $2.5 billion, this time around they were almost three times higher at $6.5 billion, thanks to foreign funds selling equities.

Interestingly, but not surprisingly, the deficit on account of petroleum products has seen a big fall, in the six months to September of close to $17 billion over the corresponding period of the previous year. However, the merchandise deficit as a whole has fallen only by $3.1 billion in the same time. While one reason for this is the slight increase in imports of gold, which have gone up by about $2.7 billion, there has also been a meaningful rise in non-gold, non-oil imports.

Over the six months to September, there was an accretion of $10.6 billion to the foreign exchange reserves — on a balance of payments basis.

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