Services Exports Lead The Way In Shrinking India's Current Account Deficit: All About It

India's current account deficit (CAD) narrowed to 1.2 per cent of GDP in the October-December quarter, down from 1.3 per cent in the previous quarter, according to the Reserve Bank of India.

The reduction in the deficit was largely due to an increase in service exports, which rose by 5.2 per cent year-over-year, driven by growth in software, business, and travel services.

The October-December quarter's CAD stood at $10.5 billion, a decrease from the $11.4 billion recorded in the preceding quarter.

While the merchandise trade deficit was marginally higher at $71.6 billion compared to $71.3 billion in the same quarter of the previous year, the increase in service exports and net service receipts helped mitigate the impact on the current account deficit.

Additionally, the primary income account saw a net outgo of $13.2 billion, primarily due to investment income payments, marking an increase from the previous year's $12.7 billion.

Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to US$ 31.4 billion, an increase of 2.1 per cent over their level during the corresponding period a year ago.

In the financial account, foreign direct investment recorded a net inflow of US$ 4.2 billion as compared with a net inflow of $2 billion in Q3 FY23.

Foreign portfolio investment recorded a net inflow of US$ 12.0 billion, higher than $4.6 billion during Q3 FY23.

External commercial borrowings to India recorded a net outflow of US$ 2.6 billion in Q3 FY24 as compared with a net outflow of $2.5 billion a year ago.

Non-resident deposits recorded a higher net inflow of $3.9 billion than $2.6 billion a year ago.

There was an accretion of foreign exchange reserves (on a BoP basis) to the tune of $6 billion in Q3:2023-24 as compared with an accretion of $11.1 billion a year ago

The current account deficit as per cent of GDP for Q2:2023-24 underwent an upward revision to 1.3 per cent from 1.0 per cent earlier due to an upward adjustment of customs data on merchandise imports, the RBI said.

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