Current account deficit widens to 2.9% of GDP in Q2

(Representative Image) Photograph:( AFP )

PTI Mumbai, Maharashtra, India Dec 07, 2018, 06.40 PM (IST)

India's current account deficit (CAD) widened to 2.9 per cent of the GDP in the second quarter of the fiscal compared to 1.1 per cent in the year-ago period, mainly due to a large trade deficit, the RBI said Friday.

The CAD, or the difference between outflow and inflow of foreign exchange in the country's current account, was $19.1 billion during the quarter ended September 30, 2018.

It increased from $6.9 billion or 1.1 per cent of GDP in the second quarter of 2017-18. The CAD stood at $15.9 billion (2.4 per cent of GDP) in the April-June quarter.

"India's current account deficit (CAD) at US$ 19.1 billion (2.9 per cent of GDP) in Q2 of 2018-19 increased from US$ 6.9 billion (1.1 per cent of GDP) in Q2 of 2017-18 and US$ 15.9 billion (2.4 per cent of GDP) in the preceding quarter," the RBI said.

The CAD has increased to 2.7 per cent of GDP in first half of 2018-19 from 1.8 per cent in the corresponding period of 2017-18 on the back of widening of the trade deficit.

As per the central bank, the widening of the CAD on a year-on-year basis was primarily on account of a higher trade deficit at $50 billion as compared to $32.5 billion a year ago.

RBI's preliminary data on India's balance of payments (BoP) for July-September 2018-19 further revealed that net services receipts increased by 10.2 per cent on a year-on-year basis, mainly on the back of a rise in net earnings from software and financial services.

Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $20.9 billion during the quarter, increasing by 19.8 per cent from their level a year ago.

In the financial account, net foreign direct investment at $7.9 billion in the second quarter of 2018-19 moderated from $12.4 billion in the similar period of last fiscal.

RBI said portfolio investment recorded net outflow of $1.6 billion as compared to an inflow of $2.1 billion in the second quarter last year on account of net sales in both the debt and equity markets.

Further, net receipts on account of non-resident deposits increased to $3.3 billion in the second quarter of 2018-19 from $0.7 billion a year ago.

In July-September this fiscal, there was a depletion of $1.9 billion of the foreign exchange reserves (on BoP basis) as against an accretion of $9.5 billion in the year-ago period. 

Story highlights

The CAD has increased to 2.7 per cent of GDP in first half of 2018-19 from 1.8 per cent in the corresponding period of 2017-18 on the back of widening of the trade deficit.