India's Current Account Deficit Widens To $9.2 Billion In June Quarter

The current account deficit in April-June amounted to 1.1 per cent of the GDP

The current account deficit (CAD) in India went up to $9.2 billion in the June quarter of 2023-24. This is more than seven times what it was in the preceding quarter, a data by the the Reserve Bank of India (RBI) said on Thursday. The CAD in the April-June period amounted to 1.1 per cent of the GDP. "The widening of CAD on a quarter-on-quarter basis was primarily on account of a higher trade deficit coupled with a lower surplus in net services and decline in private transfer receipts," the RBI data stated.

In January-March period, the CAD was $1.3 billion, or 0.2 per cent of GDP. In April-June 2022, it stood at $17.9 billion, or 2.1 per cent of GDP. While India's services trade surplus rose to $35.1 billion in April-June 2023 from $31.1 billion a year ago, it was lower than the $39.1 billion recorded in January-March 2023. Similarly, while the merchandise trade deficit improved to $56.6 billion from $63.1 billion, it was higher than $52.6 billion in January-March 2023.

On the whole, India's trade deficit in April-June 2023 was $21.5 billion, down from $32.0 billion in April-June 2022 but higher than $13.5 billion in the first quarter of 2023.

Meanwhile, India's external debt also rose marginally to $629.1 billion at June-end 2023, although the debt-GDP ratio declined, according to a RBI data released on Thursday. The debt rose by about $4.7 billion from $624.3 billion at March-end. "The external debt to GDP ratio declined to 18.6 per cent at end-June 2023 from 18.8 per cent at end-March 2023," RBI said.

Valuation effect due to the appreciation of the US dollar vis-à-vis the major currencies such as yen and SDR amounted to $3.1 billion.

US dollar-denominated debt remained the largest component of India's external debt, with a share of 54.4 per cent at end-June 2023, followed by debt denominated in the Indian rupee (30.4 per cent), SDR (5.9 per cent), yen (5.7 per cent), and the euro (3.0 per cent). Excluding the valuation effect, external debt would have increased by $7.8 billion instead of $4.7 billion at end-June 2023 over end-March 2023, the central bank said.

According to the data, at end-June 2023, long-term debt (with original maturity of above one year) was placed at $505.5 billion, recording an increase of $9.6 billion over its level at end of the preceding quarter. The share of short-term debt (with original maturity of up to one year) in total external debt declined to 19.6 per cent at end-June 2023 from 20.6 per cent at end-March 2023.

RBI further said outstanding debt of the general government decreased, while non-government debt increased at end-June 2023.