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Lower trade deficit pushes current account deficit to 0.9% of GDP in September quarter: RBI

BusinessToday.In     December 31, 2019

Current account deficit (CAD) narrowed to 0.9 per cent of the GDP in September quarter on the back of lower trade deficit, showed data released by the Reserve Bank of India on Tuesday. India's current account deficit shrunk to $6.3 billion in the second quarter of financial quarter 2019-20, in comparison to $19 billion (2.9 per cent of the GDP) in the year-ago period. The figure was recorded at $14.2 billion, or 2 per cent of GDP, in the preceding quarter.

"The contraction in the CAD was primarily on account of a lower trade deficit at $38.1 billion as compared with $50 billion a year ago," the central bank said in its statement.

India saw net services receipts increase by 0.9 per cent on annual basis during the quarter under review, RBI data showed. The apex bank attributed this rise to aN increment in net earnings from computer, travel and financial services.

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Private transfer receipts, which primarily represent remittances by Indians employed overseas, rose to $21.9 billion during the September quarter, increasing by 5.2 per cent from their level reported in the previous year.

In the financial account, net foreign direct investment remained stagnant at $7.4 billion during the July-September quarter of 2019-20. as against the figures seen last year. Foreign portfolio investment recorded net inflow of $2.5 billion - as against an outflow of $1.6 billion in Q2 of 2018-19 - on account of net purchases in the debt market, RBI data showed. Net inflow on account of external commercial borrowings (ECBs) to India was $3.2 billion as compared with $2 billion in Q2 of 2018-19.

There was an accretion of $5.1 billion to the foreign exchange reserves (on BoP basis) as against depletion of $1.9 billion in Q2 of 2018-19.

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During the first half of financial year 2019-20, CAD came down to 1.5 per cent of GDP, as opposed to 2.6 per cent in the first half of the previous financial year. This development came on the back of a reduction in the trade deficit which shrank to $84.3 billion in H1 of 2019-20 from $95.8 billion in H1 of 2018-19.

"Net invisible receipts were higher in H1 of 2019-20 mainly due to increase in net services earnings and private transfer receipts. Net FDI inflows at $21.2 billion in H1 of 2019-20 were higher than $17 billion in H1 of 2018-19," RBI said in its statement.

"Portfolio investment recorded a net inflow of $7.3 billion in H1 of 2019-20 as against an outflow of $9.8 billion a year ago. In H1 of 2019-20, there was an accretion of $19.1 billion of the foreign exchange reserves (on a BoP basis)," the central bank further added.

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