A lower trade deficit helped India bring down its current account deficit (CAD) to 1.3 per cent of GDP in the October-December quarter of 2015, against 1.5 per cent in the year-ago period, and 1.7 per cent in the preceding quarter.
In absolute terms, the CAD was $7.1 billion in the reporting quarter, $7.7 billion in the year-ago period, and $8.7 billion i I n the preceding quarter.
The trade deficit in the reporting quarter was $34 billion, against $38.6 billion a year ago, and $37.4 billion in the preceding quarter.
A current account deficit arises when a country’s import of goods, services and transfers is greater than its exports. A lower deficit strengthens the country’s currency.
On a cumulative basis, the CAD narrowed to 1.4 per cent of GDP in the first nine months of 2015-16 from 1.7 per cent in the year-ago period, on the back of a contraction in the trade deficit. In absolute terms, India’s trade deficit narrowed to $105.6 billion in the April-December period of 2015-16 from $113.4 billion in the year-ago period, according to an RBI report.
In the reporting quarter, net services receipts moderated to $18.1 billion from $20 billion in the year-ago quarter, largely due to a fall in export receipts in transport, insurance and pension services, though there has been some marginal improvement over the preceding quarter ($18 billion), the RBI said.
Private transfer receipts, mainly remittances by overseas Indians, were $15.8 billion, down from $16.5 billion in the preceding quarter and $17.5 billion a year ago.
After moderating in the July-September 2015 period, net foreign direct investment picked up to $10.8 billion.
There has been a marginal net outflow of $0.2 billion in portfolio investment in the reporting quarter as against $3.5 billion in the preceding quarter. Equity outflows in the October-December period were almost offset by inflows into the debt segment.