News Excerpt:
India's current account deficit narrowed to $10.5 billion or 1.2% of GDP in the October-December quarter from $11.4 billion in the previous quarter.
About RBI’s Data
- Reasons for narrowing CAD:
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- The rise in net services receipts more than compensated for a slight rise in merchandise trade deficit in Q3 FY24, thus helping cushion the CAD.
- Services exports grew by 5.2% year-on-year (Y-o-Y) in Q3 FY24, driven by rising exports of software, business, and travel services.
- Positive foreign direct investment (FDI) and foreign portfolio investment (FPI) flows helped keep the balance of payments (BoP) in surplus, contributing to manageable current account financing needs.
- Comparison with previous years Quarters:
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- The merchandise trade deficit was at $71.6 billion in Q3 FY24 compared to $71.3 billion a year ago.
- Net services receipts rose to $45 billion in Q3 FY24 from $38.7 billion in Q3 of the previous year.
- Primary Income Account: The net outgo from the primary income account, mainly reflecting payments of investment income, increased to $13.2 billion in Q3 FY24 from $12.7 billion a year ago.
- Private transfer receipts, mainly remittances from Indians employed overseas, amounted to $31.4 billion, showing a 2.1% increase Y-o-Y.
- Balance of Payments (BoP) Position for Q3 FY24, there was an accretion of $6 billion to the reserves, lower than $11.1 billion in the year-ago period.
- CAD Moderation for April-December 2023, the CAD moderated to 1.2% of GDP, against 2.6% of GDP in the same period of the previous year, primarily due to a lower merchandise trade deficit.
- BoP Position for April-December 2023: There was an accretion of $32.9 billion to the reserves, compared to depletion of $14.7 billion in the year-ago period.
- Economists predict further narrowing of CAD for FY24, with estimates suggesting a full-year CAD of -0.8% of GDP, compared to earlier forecasts.
About Current Account Deficit (CAD):
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