Current Account Deficit Down To 0.2 Per Cent Of GDP In Q4 FY23: RBI Data

This decline can be attributed primarily to a reduction in the trade deficit and a substantial increase in services exports. CAD serves as a crucial indicator of a country's balance of payments

India's current account deficit (CAD) in the January-March quarter of FY23 contracted to $1.3 billion, or 0.2 per cent of the GDP, according to data released by the Reserve Bank of India (RBI) on Tuesday. This decline can be attributed primarily to a reduction in the trade deficit and a substantial increase in services exports. CAD serves as a crucial indicator of a country's balance of payments.

"India's CAD decreased to $1.3 billion (0.2 per cent of GDP) in Q4:2022-23 from $16.8 billion (2.0 per cent of GDP) in Q3:2022-231, and $13.4 billion (1.6 per cent of GDP) a year ago," the Reserve Bank said.

The current account deficit measures the difference between a country's total exports of goods and services and its total imports of goods and services, along with various other financial transfers. It reflects the balance of trade in goods and services, as well as income flows and unilateral transfers.

According to RBI, the sequential decline in CAD during the fourth quarter of the previous fiscal year was primarily driven by a moderation in the trade deficit, which decreased from $71.3 billion in the preceding quarter to $52.6 billion, along with robust growth in services exports.

Net services receipts increased, sequentially and on a year-on-year (y-o-y) basis, on the back of a rise in net earnings from computer services, the RBI said.

As per the central bank, in the fourth quarter of the fiscal year 2021-2022, there was an addition of $5.6 billion to the foreign exchange reserves on a Balance of Payments (BoP) basis. This was a significant improvement compared to the depletion of $16.0 billion in the previous quarter.

However, for the entire fiscal year 2022-2023, the current account balance recorded a deficit of 2 per cent of GDP, indicating a higher deficit compared to the 1.2 per cent deficit in the previous year (2021-2022). This increase in the deficit was primarily due to the widening of the trade deficit, which rose to $265.3 billion from $189.5 billion in the previous year.