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  1. CAD narrows sharply to $0.3 billion in Q4 FY16 on the back of contraction in trade deficit

CAD narrows sharply to $0.3 billion in Q4 FY16 on the back of contraction in trade deficit

India's Current Account Deficit (CAD) narrowed sharply to $0.3 billion, that is 0.1% of GDP, in the fourth quarter of FY16.

By: | Updated: June 16, 2016 5:38 PM
India CAD, current account deficit, Q4 CAD, India trade deficit The contraction in CAD was primarily on account of a lower trade deficit, $ 24.8 billion, than in Q4 of last year ($ 31.6 billion). (Reuters Photo)

India’s Current Account Deficit (CAD) narrowed sharply to $0.3 billion, that is 0.1% of GDP, in the fourth quarter of FY16, significantly lower than $7.1 billion (1.3% of GDP) in Q3, RBI data showed. This is however, marginally lower than $0.7 billion (0.1% of GDP) in Q4 of 2014-15.

The contraction in CAD was primarily on account of a lower trade deficit, $24.8 billion, than in Q4 of last year ($31.6 billion) and $34.0 billion in the preceding quarter, RBI said.

Here are the key points of the Q4 FY16 Balance of Payments data released by RBI:

> Net services receipts declined on a y-o-y basis largely due to fall in exports of transport, financial services and telecommunication, computer and information services.

> Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $15.7 billion, a decline from their level in the preceding quarter as well as from a year ago.

Also read: CAD may widen to 1.4% of GDP in FY17, says Nomura

> Net foreign direct investment moderated to $8.8 billion in Q4 of 2015-16 from $9.3 billion in Q4 of 2014-15.

> Portfolio investment recorded a net outflow of $1.5 billion in Q4 of 2015-16 as against a net inflow of $12.5 billion in the corresponding period of last year; primarily reflecting net outflow in the debt segment.

> Non-resident Indian (NRI) deposits, however, increased in Q4 of 2015-16 over their level in Q4 last year as well as the preceding quarter.

> Foreign exchange reserves (on a BoP basis) increased by $3.3 billion in Q4 of 2015-16.

BoP during April-March 2015-16:

> The CAD narrowed to 1.1 per cent of GDP in 2015-16 from 1.8 per cent in 2014-15, on the back of contraction in the trade deficit.

> India’s trade deficit narrowed to $130.1 billion in 2015-16 from $144.9 billion in 2014-15.

> Net invisible receipts declined in 2015-16, primarily reflecting moderation in both net services earnings and private transfer receipts.

> Net FDI inflows during 2015-16 ($36.0 billion) rose sharply by 15.3 per cent over the level in 2014-15.

> Portfolio investment, however, recorded a net outflow $4.5 billion in 2015-16 as against a net inflow of $40.9 billion last year.

> In 2015-16, there was an accretion of $17.9 billion to foreign exchange reserves (on a BoP basis) as compared with $61.4 billion in 2014-15.

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