India’s current account deficit (CAD) galloped to $23 billion or 2.7% of GDP in the quarter ended December, 2021 from $9.9 billion (1.3% of GDP) in the previous quarter, according to data released by the Reserve Bank of India (RBI) on Thursday. CAD had touched $2.2 billion (0.3% of GDP) a year earlier, data showed.
“The widening of CAD in Q3:2021-22 was mainly on account of higher trade deficit,” the RBI said. Net services receipts increased both sequentially and on a year-on-year (y-o-y) basis, on the back of robust performance of net exports of computer and business services.
ICRA chief economic Aditi Nayar said: “We expect the current account deficit to recede somewhat in Q4 FY2022, to around $17-$21 billion, with the third wave [of COVID-19 infections] temporarily curtailing certain imports”.
She pointed out that if ongoing geopolitical tensions between Ukraine and Russia pushed up the average price of the “Indian crude oil basket in FY23 to $105/barrel, then the CAD is projected to widen to $90-95 billion”.
Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $23.4 billion, an increase of 13.1% from their level a year ago.
Net outgo from the primary income account, mainly reflecting net overseas investment income payments, increased sequentially as well as on a y-o-y basis.
In the financial account, net foreign direct investment inflow dropped to $5.1 billion from $17.4 billion.
Portfolio investment recorded net outflow of $5.8 billion as against an inflow of $21.2 billion
Net external commercial borrowings to India recorded outflow of $0.2 billion compared with $1.6 billion.
Non-resident deposits recorded net inflow of $1.3 billion compared with $3 billion in Q3:2020-21, as per RBI data.
There was an accretion of $0.5 billion to the foreign exchange reserves on a balance of payment basis compared with $32.5 billion.