India’s current account deficit widened to $16.9 billion in the October-December 2018 quarter against $13.7 billion in the year ago quarter, primarily on account of higher trade deficit.
Current account deficit (CAD) arises when a country’s total imports of goods, services and transfers is greater than exports. As a percentage of GDP, CAD in the reporting quarter (Q3FY2019), rose to 2.5 per cent, against 2.1 per cent in the year ago quarter.
It was however lower vis-a-vis preceding quarter’s $19.1 billion (2.9 per cent of GDP)
The widening of CAD was primarily on account of a higher trade deficit at $49.5 billion as compared with $44 billion a year ago, according to Reserve Bank of India’s statement on ‘Developments in India’s Balance of Payments’.
Net services receipts increased by 2.8 per cent on a y-o-y basis to $21.3 billion, mainly on the back of a rise in net earnings from telecommunications, computer and information services, and financial services.
Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $18.7 billion, increasing by 6.3 per cent from their level a year ago. In the financial account, net foreign direct investment at $7.5 billion in Q3 of 2018-19 increased from $4.3 billion in Q3 of 2017-18.
Portfolio investment recorded net outflow of $2.1 billion in Q3 of 2018-19 — as compared with an inflow of $5.3 billion in Q3 last year — on account of net sales in the equity market.
Net inflow on account of external commercial borrowings increased to $2 billion, from $0.3 billion a year ago. Non-Resident Indian (NRI) deposits nudged up only $139 million against $3.32 billion.
In Q3 FY19, there was a depletion of $4.3 billion in foreign exchange reserves as against an accretion of $9.4 billion in the year ago period.
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