Higher trade deficit pushes CAD to 2.5 pc during Q3

Net FDI increases from $4.3 bn to $7.5bn y-o-y

MUMBAI: India’s current account deficit (CAD) at $16.9 billion (2.5 per cent of GDP) during the third quarter of 2018-19 has increased from $13.7 billion (2.1 per cent of GDP) during the same period last year. The CAD this time has been 23.35 per cent larger in absolute terms on year on year.

However, compared with CAD recorded during the second quarter at $19.1 billion (2.9 per cent of GDP), the Q3 has witnessed a moderation.

The RBI statement said the widening of the CAD on a year-on-year (y-o-y) basis was primarily on account of a higher trade deficit at $49.5 billion as compared with $44 billion a year ago.

As per the statistics available, the net services receipts increased by 2.8 per cent on a y-o-y basis mainly on the back of a rise in net earnings from telecommunications, computer and information services and financial services.

At the same time, the private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $18.7 billion, increasing by 6.3 per cent from their level a year ago.

Analysis of the financial account shows that net foreign direct investment (FDI) at $7.5 billion during the third quarter of the current year has increased substantially from $4.3 billion recorded during the same period last year.

During the third quarter of the current year, portfolio investment recorded net outflow of $2.1 billion – as compared with an inflow of $5.3 billion recorded for the same period last year – on account of net sale in the equity market.

Net inflow on account of external commercial borrowings (ECB) increased to $2 billion in Q3 of 2018-19 from 0.3 billion a year ago.

During the quarter under review, there was a depletion of $4.3 billion of the foreign exchange reserves (on BoP basis) as against an accretion of $9.4 billion during the same quarter last year.

 

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