India’s current account deficit (CAD) widened to $15.8 billion in the April-June quarter against $15 billion in the year-ago quarter, due to higher trade deficit.
Current account deficit (CAD) arises when a country's total imports of goods, services and transfers is greater than exports.
The combined effect of a widening current account deficit and subsequent rupee depreciation is likely to increase the borrowing costs of Indian corporates, cautioned India Ratings.
As a percentage of GDP, CAD in the reporting quarter, however, was a shade lower at 2.4 per cent against 2.5 per cent in the year ago quarter.
CAD was much wider vis-a-vis $13 billion (1.9 per cent of GDP) in the preceding quarter.
Trade deficit was higher at $45.7 billion in the reporting period as compared with $41.9 billion a year ago.
Net services receipts increased 2.1 per cent on a year-on-year basis (to $18.7 billion as per provisional data for the reporting quarter) mainly on the back of a rise in net earnings from software and financial services.
Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $18.8 billion, increasing by 16.9 per cent from their level a year ago.
In the financial account, net foreign direct investment (FDI) at $9.7 billion in the reporting quarter was higher than $7.1 billion in the year ago period.
Portfolio investment recorded net outflow of $8.1 billion compared to $12.5 billion in Q1 last year, on account of net sales in both the debt and equity markets, the RBI said.
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