Current Account Deficit Rises To 2.4% Of GDP In April-June Quarter

Ivan Schwartz
September 16, 2017

India's current account deficit (CAD) soared to a four-year high of $14.3 billion, or 2.4% of gross domestic product (GDP), in the June quarter as gold imports picked up ahead of implementation of the goods and services tax (GST) starting July 1.

Trade deficit widened to $11.64 billion in the month under review from $7.7 billion in August 2016, due to increase in gold imports that rose by about 69 per cent to $1.88 billion last month. Meanwhile, Turkey's current account deficit for the first seven months of 2017 stood at $25.96 billion, up from some $4.47 billion compared to the January-July 2016 period.

Credit rating agency ICRA said that the CAD increase did not come as a surprise. Commenting on the data, Federation of Indian Export Organisations (FIEO) President Ganesh Gupta said while the August figures are encouraging, "I am anxious about future growth as order booking position from October onwards is not good in view of increasing global uncertainties, rupee volatility and challenges at the domestic front".

During the quarter in consideration, net foreign direct investment (FDI) at $7.2 billion in nearly doubled from the level in the same period past year.

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Net portfolio investment recorded a substantial inflow of $12.5 billion in the first quarter of 2017-18, primarily in the debt segment, as compared with $2.1 billion in the corresponding quarter a year ago.

Net services receipts rose by 15.7 per cent on a y-o-y basis owing to a a rise in net earnings from travel, construction and other business services.

Moreover, private transfer receipts, mainly representing remittances by Indians employed overseas, at $16.1 billion increased 5.3 per cent over the corresponding quarter of the previous year.

Cumulative value of imports for April-August 2017-18 was $181,72 billion (Rs1,169,589.74 crore) against $143.50 billion (Rs961,178.43 crore), which showed a growth of 26.63 per cent in dollar terms and a 21.68 per cent growth in rupee terms over the same period a year ago.

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