India’s current account deficit declined to $18.2 billion (2.2% of GDP) in Q3 of FY23 from $30.9 billion (3.7% of GDP) in Q2 of FY23 and $22.2 billion (2.7% of GDP) in the year-earlier period, according to RBI data.
“Underlying the lower current account deficit in Q3 2022-23 was a narrowing of merchandise trade deficit to $72.7 billion from $78.3 billion in Q2 2022-23, coupled with robust services and private transfer receipts,” the Reserve Bank of India said on Friday.
Services exports reported a growth of 24.5% year-on-year on the back of rising exports of software, business and travel services. Net services receipts increased both sequentially and on a year on year basis.
Net outgo from the primary income account, mainly reflecting investment income payments, increased to $12.7 billion from $11.5 billion a year earlier.
Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $30.8 billion, an increase of 31.7% from the year earlier.
In the financial account, net foreign direct investment decreased to $2.1 billion from $4.6 billion a year earlier, as per RBI data.
Net foreign portfolio investment recorded inflows of $4.6 billion, as against an outflow of $5.8 billion in Q3 of 2021-22. Net external commercial borrowings to India recorded an outflow of $2.6 billion in Q3 of 2022-23 as compared with an outflow of $0.4 billion a year earlier.
Non-resident deposits recorded net inflows of $2.6 billion as compared with net inflows of $1.3 billion in Q3 of 2021-22. “There was an accretion to foreign exchange reserves (on a BoP basis) to the tune of $11.1 billion in Q3 of 2022-23 as compared with an accretion of $0.5 billion in Q3 of 2021-22,” the RBI said.
Aditi Nayar, Chief Economist, Head – Research & Outreach, ICRA Ltd. said, “Following the downward revision in the Q2 FY2023 current account deficit, the CAD for Q3 has printed well below our expectations, resulting in a compressed print of $67 billion for April-December 2022.”
“With a considerable compression in the average trade deficit in Jan.-Feb. 2023 relative to the previous three months, we expect the size of the CAD to recede further to around $10-12 billion in Q4 FY2023. Based on this, we project the FY2023 CAD at $77-80 billion (-2.3% of GDP), which is quite contained as compared to the levels that were being feared in mid 2022,” she said.
