Lower trade deficit and rise in net services receipts helped India narrow its current account deficit (CAD) sharply to $1.4 billion in Q3 (October to December) of FY20 from $17.7 billion in Q3 of FY19 and $6.5 billion in the preceding Q2 (July to September) quarter of FY20.
As a percentage of GDP, the CAD in the reporting quarter (Q3) was lower at 0.2 per cent of the GDP against 2.7 per cent in the year-ago quarter and 0.9 per cent in Q2 of FY20.
The RBI said the contraction in CAD was primarily on account of lower trade deficit at $34.6 billion ($49.3 billion in the year-ago period) and rise in net services receipts at $21.9 billion ($21.7 billion).
Net services receipts increased on the back of rise in net earnings from computer, travel and financial services. Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $20.6 billion, up by 9 per cent from their level a year ago.
In the financial account, net foreign direct investment at $10 billion was higher than $7.3 billion in Q3 of FY19.
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