India’s current account deficit (CAD) for the July-September period or Q2 of 2024-25 moderated marginally to $11.2 billion or 1.2% of GDP from $11.3 billion or 1.3% of GDP a year ago, as per preliminary balance of payments (BoP) data released by the Reserve Bank of India (RBI) on Friday.
While the merchandise trade deficit increased to $75.3 billion from $64.5 billion in Q2 of 2023-24, net services receipts rose to $44.5 billion from $39.9 billion a year ago. “Services exports have risen on a year-on-year basis across major categories such as computer services, business services, travel services and transportation services,” the RBI said.
In the financial account, net foreign direct investment (FDI) recorded an outflow of $2.2 billion in Q2 relative to a $0.8 billion outflow a year ago. in the same period last year.
“India’s CAD came in well below our expectation for Q2 FY25, providing some solace in light of the sharp weakening in the Rupee seen recently,” remarked Aditi Nayar, chief economist at ICRA.
“Looking ahead, the initial estimate of a record-high trade deficit in November could well bloat the current account deficit to 2.5%-2.7% of GDP in the current quarter. For 2024-25 as a whole, the deficit may print around 1.1%-1.2% of GDP,” she reckoned.
Net inflows from foreign portfolio investments increased to $19.9 billion from $4.9 billion a year ago.
There was an $18.6 billion accretion to the foreign exchange reserves (on a BoP basis) during the quarter, compared to just $2.5 billion a year ago.
Net outgo on the primary income account, primarily reflecting payments of investment income, dropped to $9.5 billion from $11.6 billion in Q2 last year, while private transfer receipts, mainly representing remittances by Indians overseas grew to $31.9 billion from $28.1 billion a year ago.
Net inflows from external commercial borrowings (ECBs) to India amounted to $5 billion in Q2, as against outflows of $1.9 billion in the corresponding period a year ago. Non-resident deposits recorded net inflows of $6.2 billion, up from $3.2 billion a year ago.
BoP during H1FY25
During the April-September (H1FY25 ) period India’s current account deficit increased to $21.4 billion (1.2% of GDP) in as compared with $20.2 billion (1.2% of GDP) in same period last year (H1:FY24).
Net invisibles receipts at $119 billion were higher in H1FY25 as compared with $101 billion a year ago, primarily on account of higher net services receipts, RBI said.
Net FDI inflows at $4.4 billion in H1FY25 was higher than $3.9 billion in H1FY24. FPI recorded almost flat net inflows of $20.8 billion in period as compared with net inflows of $20.7 billion a year ago.
In H1:FY25, there was an increase of $23.8 billion to the foreign exchange reserves (on a BoP basis) as compared with an increase $27 billion a year ago.
Foreign exchange reserves in nominal terms (i.e., including valuation effects) increased by $59.4 billion during April-September 2024-25 as compared with an increase of $9.3 billion in the same period of previous year, as per RBI data.
The valuation gain, primarily reflecting the depreciation of the U.S. dollar against major currencies and higher prices of gold amounted to $35.5 billion during April-September 2024 period as against a valuation loss of $17.7 billion during April-September 2023, the RBI said.
Published – December 27, 2024 09:06 pm IST
