​​​
  1. Q4 Current Account Deficit at 1.9%, strong capital flows a relief

Q4 Current Account Deficit at 1.9%, strong capital flows a relief

The Q4 deficit was, slightly lower than the previous quarter’s $13.7 billion (2.1%); for FY18 as a whole, the CAD increased considerably to 1.9% from 0.6% in FY17.

By: | New Delhi | Published: June 14, 2018 4:49 AM

A large merchandise trade deficit of $41.6 billion — thanks to sharper increase in imports than exports — pushed India’s current account deficit (CAD) to $13 billion or 1.9% of GDP in Q4FY18, compared with a benign 0.4% of GDP in the year-ago quarter. The Q4 deficit was, however, slightly lower than the previous quarter’s $13.7 billion (2.1%); for FY18 as a whole, the CAD increased considerably to 1.9% from 0.6% in FY17.

Citing the risk of rising oil prices, Goldman Sachs recently upped India’s CAD forecast for FY19 to 2.4% from 2.1%.

According to the data released by the Reserve Bank of India (RBI) on Wednesday, the capital account saw net inflows of a robust $25 billion in January-March quarter, higher than $22.5 billion in the previous quarter and far above $10.4 billion in the year-ago quarter. So, despite the relatively high CAD in Q4, it was financed comfortably, and there was an accretion of $13.2 billion to the foreign exchange reserves.

Even though the CAD was much lower in the Q4FY17, the accretion to the reserves was just $7.3 billion.

There had been a slowing of inflows from foreign portfolio investors (FPIs) until recently; while this has been a cause for concern, economic affairs secretary Subhash Garg has said that these investors “are now back”. Till June this financial year, there was a net FPI outflow of Rs 48,324 crore compared with a net inflow of Rs 1,44,682 crore in FY18.

Net services receipts increased 8.8% on a year-on-year basis in Q4FY18 mainly on the back of a rise in net earnings from software services and other business services. Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $18.1 billion, up 15.1% from their level a year ago.

In the financial account, net foreign direct investment at $6.4 billion in Q4FY18 was higher than the $5 billion in Q4FY17.

Portfolio investment recorded net inflow of $2.3 billion in Q4FY18 compared with an inflow of $10.8 billion in Q4FY19 on account of moderation in net purchases in both the debt and equity markets. Net receipts on account of non-resident deposits amounted to $4.6 billion in Q4 against $2.7 billion a year ago.

As for the whole of FY18, India’s trade deficit increased to $160 billion from $112.4 billion in FY17. Net invisible receipts were higher in FY18 mainly due to increase in net services earnings and private transfer receipts. “Gross FDI inflows to India increased to US$61.0 billion in 2017-18 from US$60.2 billion in 2016-17. Net FDI inflows in 2017-18 moderated to US$30.3 billion from US$35.6 billion in 2016-17. Portfolio investment recorded a net inflow of US$22.1 billion in 2017-18 as compared with US$ 7.6billion a year ago. In 2017-18, there was an accretion of US$43.6 billion to the foreign exchange reserves (on a BoP basis),” the RBI said.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Go to Top