India recorded a current account surplus of $5.7 billion or 0.6 per cent of GDP in the March quarter, the Reserve Bank of India said on Monday.
This is the first time in ten quarters that the crucial metric of the country’s external strength has turned into surplus mode.
In the year-ago period, the current account deficit stood at $1.3 billion or 0.2 per cent of GDP, and the same was $8.7 billion or 1 per cent of GDP in the preceding quarter ending December 2023.
For FY24, the current account deficit narrowed to $23.2 billion or 0.7 per cent of GDP against $67 billion or 2 per cent of GDP in FY23, the RBI said in a release on the Developments in India’s Balance of Payments.
Domestic rating agency Icra’s chief economist Aditi Nayar said it expects the FY25 CAD to rise slightly to 1-1.2 per cent of GDP but was quick to add that it will be eminently manageable.
The deficit will go up on a widening in the merchandise trade gap this fiscal on the back of domestic demand and higher commodity prices, she said, adding that the higher foreign portfolio investments (FPI) on the country’s bond market indices will be a key factor to make the financing comfortable.
In January-March 2024, the merchandise trade deficit stood at $50.9 billion, lower than the $52.6 billion a year ago.
The net services receipts at $42.7 billion were higher than the $39.1 billion on the back of a 4.1 per cent growth in the segment, the central bank said, adding that this helped swing the current account into the surplus territory.
The net outgo on the primary income account, mainly reflecting payments of investment income, increased to $14.8 billion from $12.6 billion a year ago, the data released by the RBI said.
Private transfer receipts, mainly representing remittances by Indians employed overseas, grew 11.9 per cent to $32 billion in the March quarter.
The non-resident deposits also surged to $5.4 billion in January-March compared to $3.6 billion in the year-ago period.
The net foreign direct investment flows were $2 billion in Q4 FY24 against $6.4 billion a year ago.
Foreign portfolio investment recorded a net inflow of $11.4 billion during the quarter compared to a net outflow of $1.7 billion a year ago.
Net inflows under external commercial borrowings to India were $2.6 billion against $1.7 billion.
In FY24, the portfolio investment recorded a net inflow of $44.1 billion against an outflow of $5.2 billion a year ago, while net FDI plummeted to $9.8 billion from $28 billion in FY23, the RBI said.
Higher foreign portfolio investment at $44.1 billion in FY24 against outflows of $4.8 billion helped the overall capital account post a net addition of $87 billion compared to $57.9 billion in FY23, it added.
