India’s current account deficit in Q1 FY25 widens to $9.7 billion

The current account surplus for Q4:2023-24 was revised downwards to $ 4.6 billion from US$ 5.7 billion earlier due to an upward adjustment of customs data on merchandise imports, the RBI said.

India’s current account deficit (CAD) widened marginally to $ 9.7 billion (1.1% of GDP) in Q1:2024-25 from $8.9 billion (1.0% of GDP) in Q1:2023-24 and against a surplus of $4.6 billion (0.5% of GDP) in Q4:2023-24, according to dada released by the Reserve Bank of India (RBI) on Monday (September 30, 2024).

The current account surplus for Q4:2023-24 was revised downwards to $4.6 billion from US$ 5.7 billion earlier due to an upward adjustment of customs data on merchandise imports, the RBI said.

“The widening of CAD on a year-on-year (y-o-y) basis was primarily due to a rise in merchandise trade deficit to $ 65.1 billion in Q1:2024-25 from $56.7 billion in Q1:2023-24,” the RBI said.

Net services receipts increased on a y-o-y basis to $39.7 billion in Q1:2024-25 from $ 35.1 billion a year ago. Services exports have risen on a y-o-y basis across major categories such as computer services, business services, travel services and transportation services.

Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $29.5 billion in Q1:2024-25 from $ 27.1 billion in Q1:2023-24, as per RBI data.

Net outgo on the primary income account, primarily reflecting payments of investment income, increased to $10.7 billion in Q1:2024-25 from $10.2 billion in Q1:2023-24.

In the financial account, net foreign direct investment inflows increased to $6.3 billion in Q1:2024-25 from $ 4.7 billion in the corresponding period of 2023-24.

Net inflows under foreign portfolio investment moderated to $0.9 billion from $ 15.7 billion in Q1:2023-24 and net inflows under external commercial borrowings (ECBs) to India amounted to $1.8 billion in Q1:2024-25, lower than $5.6 billion in the corresponding period a year ago.

Non-resident deposits (NRI deposits) recorded net inflows of $ 4.0 billion, higher than $ 2.2 billion a year ago.

There was an accretion of $5.2 billion to the foreign exchange reserves (on a BoP basis) in Q1:2024-25 as compared with $24.4 billion in Q1:2023-24, the RBI said.

Commenting on the CAD, Madan Sabnavis, chief economist, Bank of baroda said “India’s balance of payments situation remained largely stable for Q1-FY25 with net accretion of $ 5.2 billion to forex reserves compared with $ 24.4 billion last year.” He said the trade deficit widened to $ 65 billion compared with $ 56.7 billion last year. Both oil and gold were responsible for this phenomenon as well as increase in other non-oil imports. Stating that the CAD was marginally higher at 1.1% as against 1% of GDP last year, he said this was fairly comfortable and “we may expect the deficit to be around 1.5% for the year based on these trends persisting for the full year.” He said FDI flows were higher this quarter though FPI was lower. The latter will turnaround given the debt flows expected die to the inclusion of bonds in JP Morgan index.

Published - September 30, 2024 05:32 pm IST