India's current account deficit narrowed to $1.3 billion or 0.2% of GDP in the January-March quarter of FY23, mainly due to moderation in the trade deficit and a robust increase in services exports, RBI data showed on June 27.
However, for the 2022-23 fiscal, the current account balance recorded a deficit of 2% of GDP compared to 1.2%t in 2021-22.
“India’s current account deficit (CAD) decreased to $1.3 billion (0.2% of GDP) in Q4:2022-23 from $16.8 billion (2.0% of GDP) in Q3:2022-231, and $13.4 billion (1.6% of GDP) a year ago [Q4:2021-22],” as per the RBI’s ‘Developments in India’s Balance of Payments during the Fourth Quarter (January-March) of 2022-23’.
The sequential decline in CAD in the fourth quarter of 2022-23 was mainly on account of a moderation in the trade deficit to $52.6 billion from $71.3 billion in the preceding quarter, coupled with robust services exports, it said.
Net services receipts increased, on a sequentially and year-on-year (y-o-y) basis, on the back of a rise in net earnings from computer services.
The central bank had been maintaining that the CAD, a key indicator of the country's balance of payments, would remain manageable.
Private transfer receipts in the January-March period, mainly representing remittances by Indians employed overseas, increased to USD 28.6 billion, up by 20.8 per cent year-on-year.
In the financial account, the RBI said net foreign direct investment (FDI) at USD 6.4 billion was higher than USD 2.0 billion in Q3 2022-23, although lower than a year ago (USD 13.8 billion).
Net foreign portfolio investment (FPI) recorded an outflow of $1.7 billion — driven by the equity segment compared to an outflow of $15.2 billion during the corresponding period a year ago.
Net external commercial borrowings (ECBs) to India recorded an inflow of $1.7 billion against an outflow of $2.5 billion during the third quarter of 2022-23 and an inflow of $3.3 billion in the final quarter of 2021-22.
"There was an accretion to the foreign exchange reserves (on a BoP basis) to the tune of $5.6 billion as against a depletion of $16 billion in Q4:2021-22," the RBI said.
Regarding BoP during 2022-23, the RBI said the current account balance recorded a deficit of 2.0% of GDP in 2022-23 compared to a deficit of 1.2% in 2021-22 as the trade deficit widened to $265.3 billion from $189.5 billion a year ago.
Net invisible receipts were higher in 2022-23 due to an increase in net exports of services and net private transfer receipts, even though net income outgo was higher year-on-year.
Net FDI inflows at $28 billion in 2022-23 were lower than $38.6 billion in 2021-22.
The fiscal year also witnessed a depletion of $9.1 billion of the foreign exchange reserves (on a BoP basis).
