News Brief

India's CAD Narrows In Q4 As Services Exports Boom

Swarajya Staff

Jun 27, 2023, 07:23 PM | Updated Jun 28, 2023, 12:43 PM IST


Indian Economy (Representative Image)
Indian Economy (Representative Image)

India's current account deficit (CAD) in the fourth quarter of the fiscal year 2022-23 significantly narrowed to $1.3 billion, accounting for 0.2 per cent of the GDP. This improvement was primarily driven by a decrease in the trade deficit and robust growth in services exports. The previous quarter had a CAD of $16.8 billion (2 per cent of GDP), while a year ago, in Q4, it stood at $13.4 billion (1.6 per cent of GDP).

The Reserve Bank of India (RBI) stated in its balance of payments notification that the decline in Q4 CAD was primarily due to a moderation in the trade deficit, which decreased from $71.3 billion in Q3:2022-23 to $52.6 billion in Q4:2022-23.

Additionally, strong services exports, particularly in computer services, contributed to a significant increase in net services receipts on a sequential and year-on-year basis.

Private transfer receipts, mainly comprising remittances from overseas Indians, grew by 20.8 per cent from the previous year to reach $28.6 billion. However, the primary income account, reflecting net income payments on foreign investments, increased year-on-year but experienced a slight decline sequentially.

In terms of financial accounts, India's net foreign direct investment (FDI) saw a notable rise, reaching $6.4 billion in Q4FY23, compared to $2 billion in Q3FY23. Nevertheless, FDI in Q4FY23 was lower than the $13.8 billion recorded in the same quarter a year ago.

Foreign exchange reserves witnessed an accretion of $5.6 billion on a balance of payments basis in Q4, in contrast to a depletion of $16 billion in Q4FY22.

For the full fiscal year 2022-23, the current account balance posted a deficit of 2 per cent of GDP, compared to a deficit of 1.2 per cent in FY22.

The widening of the trade deficit, which rose from $189.5 billion to $265.3 billion over the year, contributed to this change. Net FDI inflows amounted to $28 billion in 2022-23, lower than the $38.6 billion recorded in 2021-22. During 2022-23, foreign exchange reserves depleted by $9.1 billion on a balance of payments basis.


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