BUSINESS

Current account deficit narrows to 0.9% of GDP

India’s current account deficit (CAD) narrowed to 0.9% of GDP, or $6.3 billion, in the September 2019 quarter, on account of lower trade deficit. It had stood at 2.9% of the gross domestic product (GDP), or $19 billion, in the corresponding quarter of 2018-19.

On a sequential basis, CAD had printed 2% of GDP, or $14.2 billion, in the June 2019 quarter. “The contraction in the CAD was primarily on account of a lower trade deficit at $38.1 billion as compared with $50 billion a year ago,” the Reserve Bank of India (RBI) said in a release on Tuesday.

During the first half of the current financial year, CAD narrowed to 1.5% of the GDP from 2.6% in the corresponding period in 2018-19, on the back of a reduction in the trade deficit, which shrank to $84.3 billion as compared with $95.8 billion a year ago. The balance of payments stood at $5.12 billion in the second quarter and $19.1 billion during the first half of this fiscal.

Net foreign direct investment stood at $7.4 billion, almost the same level as in the second quarter of 2018-19.

Helped by net purchases in the debt market, foreign portfolio investment recorded a net inflow of $2.5 billion in the September 2019 quarter, against an outflow of $1.6 billion a year ago.

In the April-September 2019 period, while the net FDI inflows were at $21.2 billion, portfolio investment recorded a net inflow of $7.3 billion.

Net services receipts increased 0.9% on in July-September on a year-on-year basis, on the back of a rise in net earnings from computer, travel and financial services, the central bank said.

In the second quarter of 2019-20, private transfer receipts, mainly representing remittances by Indians employed overseas, rose to $21.9 billion, an increase of 5.2% compared to a year ago.

The net inflow on account of external commercial borrowings to the country was $3.2 billion in the second quarter as compared with $2 billion a year earlier.