India’s current account deficit (CAD) declined to $10.5 billion in the third quarter of 2023-24 as compared to $11.4 billion during the previous three months and $16.8 billion a year back, according to the data released by Reserve Bank of India (RBI) said on Tuesday.
Per the data, the CAD in the October-December quarter amounted to 1.2 per cent of India’s GDP. The CAD in July-September 2023 period was 1.3 per cent of the GDP and it was 2.0 per cent of GDP during October-December 2022 period.
Current account deficit is the difference between exports and imports of goods and services and it is a key indicator of the country’s external sector.
The merchandise trade deficit at $71.6 billion was marginally higher than $71.3 billion during the third quarter of 2022-23.
Services exports, the RBI data showed, grew by 5.2 per cent on a YoY basis on the back of rising exports of software, business and travel services. Net services receipts increased both sequentially and from a year ago that helped cushion the current account deficit.
In the financial account, foreign direct investment recorded a net inflow of $4.2 billion as compared with a net inflow of $2.0 billion in Q3 FY2022-23. Further, foreign portfolio investment recorded a net inflow of $12.0 billion, higher than $4.6 billion during Q3 FY2022-23.
The RBI data showed that net FDI inflow at $8.5 billion during April-December 2023 was lower than $21.6 billion during April-December 2022.
Also, it said that there was an accretion of foreign exchange reserves (on a BoP basis) to the tune of $6.0 billion in the third quarter as compared with an accretion of $11.1 billion a year ago.
External commercial borrowings to India recorded a net outflow of $2.6 billion in Q3FY24 as compared with a net outflow of $2.5 billion a year ago. Non-resident deposits recorded a higher net inflow of $3.9 billion than $2.6 billion a year ago.