New Delhi: India’s current account balance recorded a surplus of $5.7 billion in the January-March quarter due to a lower trade deficit and a higher inflow of remittances by Indians employed overseas, the Reserve Bank of India (RBI) data showed on Monday.
As per analysts, this is the first time in ten quarters that India’s balance of payments has turned surplus.
For the full financial year 2023-24, the current account deficit declined to $23.2 billion or 0.7 per cent of the country’s gross domestic product (GDP) from $67 billion or 2 per cent of GDP in 2022-23.
Current account deficit (CAD) occurs when the value of a country’s imports of foreign goods, services and international transfers of capital, exceeds the value of exports. The RBI noted in a statement that the current account deficit moderated in 2023-24 “on the back of a lower merchandise trade deficit.”
India’s overall trade deficit (merchandise and services together) declined by 35.77 per cent to $78.12 billion in the year ended March 2024. Foreign portfolio investment increased by $44.1 billion in 2023-24, compared to an outflow of $5.2 billion in the year before.
However, net foreign direct investment (FDI) inflow declined to $9.8 billion in the year ended March 2024 from $28 billion recorded in the previous year.
As per the rating agency ICRA, the current account deficit is likely to remain in the range of 1 to 1.2 per cent of GDP in the current financial year. “A CAD of 1.0-1.2% of GDP in FY2025 would be comfortably financed, particularly given the expectations of large FPI-debt inflows on account of the bond index inclusion starting end-June 2024,” said Aditi Nayar, Chief Economist at ICRA.
Madan Sabnavis, Chief Economist at Bank of Baroda said it is likely to remain in the range of 1 to 1.5% of the GDP on the back of steady capital inflows. “This will also keep the rupee range bound at Rs 83-84/$ with external factors like strength of the dollar guiding the currency,” Sabnavis said.
During the quarter ended March 2024, the current account balance recorded a surplus of 0.6% of GDP against a deficit of 1% of GDP in the previous quarter. Merchandise trade deficit in the quarter narrowed to $50.9 billion from $52.6 billion recorded in Q4FY23.
Services exports grew by 4.1 per cent on a year-on-year basis during the quarter under review on the back of rising exports of software, travel and business services. Net services receipt at $42.7 billion in the January-March quarter was higher than $39.1 billion recorded in the corresponding period of the previous year.
Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $32.0 billion in the January-March quarter, an increase of 11.9 per cent over their level a year ago.