India’s current account deficit shrinks to 1 year low at 0.2 per cent

Mumbai: India’s current account deficit (CAD) narrowed sharply to $1.3 billion (0.2 per cent of GDP) in Q4 of 2014-15 from $8.3 billion (1.6 per cent of GDP) in Q3; on a year-on-year basis, however, the CAD was a shade higher ($2 billion or 0.2 per cent of GDP in Q4 of 2013-14).

Releasing the preliminary data on India’s balance of payments (BoP) for the fourth quarter i.e., January-March on Wednesday, the RBI said the merchandise trade deficit ($31.7 billion during Q4 2014-15) contracted sharply on a quarter-on-quarter basis on account of a larger decline in merchandise imports (13.4 per cent) than in merchandise exports (10.4 per cent.

The reduction in the CAD in Q4 2014-15 was primarily on account of lower trade deficit as net earnings through services and primary income (profit, dividend and interest) witnessed a decline in q-o-q terms albeit secondary income recorded a marginal increase of 0.4 per cent, the RBI said.

Net inflows of FDIs and FIIs were higher on a q-o-q basis, though net loans availed by banks witnessed an outflow $3.5 billion mainly on account of increase in balances of foreign currency assets held abroad by banks.