India’s Q2 Current Account Deficit Widens To 2.9% of GDP

10-December-2018

The country’s current account deficit (CAD) widened to 2.9 percent of the gross domestic product (GDP) in the July-September quarter. During the same quarter last year, it stood at 1.1 percent. RBI (Reserve Bank of India) said that it was mainly due to the higher trade deficit of $50 billion when compared to $32.5 billion in the same period last year.

CAD measures the difference between outflow and inflow of foreign exchange in the country’s current account. It Increased to $19.1 billion during the September ended quarter when compared to $6.9 billion in September 2017. CAD for the April-June 2018 quarter was at $15.9 billion or 2.4 percent of GDP.

“India’s CAD at $19.1 billion (2.9 percent of GDP) in the second quarter of 2018-19 increased from $6.9 billion (1.1 percent of GDP) in Q2 of 2017-18 and $15.9 billion (2.4 percent of GDP) in the preceding quarter,” the central bank said.

As for the first half of the 2018-19, CAD has increased to 2.7 percent of GDP from 1.8 percent in the corresponding period of 2017-18.

RBI’s preliminary data on India’s balance of payments for the quarter under review showed that the net services receipts were up by 10.2 percent on a yearly basis, mainly due to a rise in net earnings from software and financial services.

Private transfer receipts, that mainly represent remittances from Indians employed overseas, amounted to $20.9 billion during the quarter, increasing by 19.8 percent from their level a year ago. The net foreign direct investment reduced to $7.9 billion in the second quarter of 2018-19 from $12.4 billion last year. Portfolio investments recorded net outflow of $1.6 billion when compared with an inflow of $2.1 billion last year on account of net sales in both the debt and equity markets.

Net receipts on account of non-resident deposits rose to $3.3 billion from $0.7 billion a year ago. For the same quarter, there was a depletion of $1.9 billion of the foreign exchange reserves as against an increase of $9.5 billion in September 2017.

Source: GOODRETURNS

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