Current account deficit narrows in December quarter: RBI

CAD narrows in Q3: The Reserve Bank of India (RBI) on Tuesday said that India's current account deficit (CAD) decreased to $10.5 billion or 1.2 per cent of the Gross Domestic Product (GDP) in the October-December quarter. This marks a decline from $11.4 billion in the previous three months and $16.8 billion in the corresponding period a year ago.

According to the RBI, net foreign direct investment (FDI) inflow amounted to $8.5 billion during April-December 2023, down from $21.6 billion recorded during the same period in the previous year.

Furthermore, the accretion of foreign exchange reserves stood at $6.0 billion in the October-December quarter, compared to $11.1 billion during the corresponding period last year.

The merchandise trade deficit slightly increased to $71.6 billion from $71.3 billion in the third quarter of the previous financial year.

Services exports saw a growth of 5.2 per cent year-on-year, primarily driven by increasing exports of software, business, and travel services. This growth in net services receipts contributed to mitigating the current account deficit.

In terms of the financial account, foreign direct investment recorded a net inflow of $4.2 billion, more than double the net inflow recorded in the third quarter of the previous financial year.

Foreign portfolio investment also saw a significant increase, with a net inflow of $12.0 billion in the quarter, compared to $4.6 billion a year ago.

External commercial borrowings to India recorded a net outflow of $2.6 billion in October-December, while non-resident deposits saw a higher net inflow of $3.9 billion compared to $2.6 billion in the same period a year ago.

Overall, the data suggests a positive trend in India's external sector, with improvements in the current account deficit and notable inflows in FDI and portfolio investments, despite some outflows in external commercial borrowings.

(With PTI inputs)