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Current account deficit (CAD) widened to 2.9 per cent of the GDP in the second quarter of the fiscal compared to 1.1 per cent in the year-ago period, mainly due to a large trade deficit, the RBI said on Friday.
The CAD, or the difference between outflow and inflow of foreign exchange in the country’s current account, was $ 19.1 billion during the quarter ended September 30, 2018. It increased from $ 6.9 billion or 1.1 per cent of GDP in the second quarter of 2017-18. The CAD stood at $ 15.9 billion (2.4 per cent of GDP) in the April-June quarter.
“India’s current account deficit (CAD) at $ 19.1 billion (2.9 per cent of GDP) in Q2 of 2018-19 increased from $ 6.9 billion (1.1 per cent of GDP) in Q2 of 2017-18 and $ 15.9 billion (2.4 per cent of GDP) in the preceding quarter,” the RBI said. The CAD has increased to 2.7 per cent of GDP in first half of 2018-19 from 1.8 per cent in the corresponding period of 2017-18 on the back of widening of the trade deficit. As per the central bank, the widening of the CAD on a year-on-year basis was primarily on account of a higher trade deficit at $ 50 billion as compared to $ 32.5 billion a year ago.
RBI’s preliminary data on India’s balance of payments (BoP) for July-September 2018-19 further revealed that net services receipts increased by 10.2 per cent on a y-o-y basis, 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 $ 20.9 billion during the quarter, increasing by 19.8 per cent from their level a year ago. In the financial account, net foreign direct investment at $ 7.9 billion in the second quarter of 2018-19 moderated from $ 12.4 billion in the similar period of last fiscal.
RBI said portfolio investment recorded net outflow of $ 1.6 billion as compared to an inflow of $ 2.1 billion in the second quarter last year on account of net sales in both the debt and equity markets. Further, net receipts on account of non-resident deposits increased to $ 3.3 billion in the second quarter of 2018-19 from $ 0.7 billion a year ago. In July-September this fiscal, there was a depletion of $1.9 billion of the foreign exchange reserves (on BoP basis) as against an accretion of $ 9.5 billion in the year ago period.
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