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Higher trade deficit pushes up Q3 current account deficit to $13.5 billion
The widening of the CAD on a year-on-year basis is primarily due to a higher trade deficit which rose to USD 44.1 billion in the reporting quarter due to a larger increase in merchandise imports relative to exports.
Higher trade deficit pushes up Q3 current account deficit to $13.5 billion

The current account deficit (CAD) rose to 2 per cent of the GDP at USD 13.5 billion in the December quarter, up from USD 8 billion or 1.4 per cent in the year-ago period, on the back of higher trade deficit, shows the Reserve Bank data.

The CAD, which shows the difference between foreign exchange earned and spent, stood at USD 7.2 billion or 1.1 per cent of gross domestic product (GDP) in the preceding September quarter, according to data released by the central bank today.

"The widening of the CAD on a year-on-year basis is primarily due to a higher trade deficit which rose to USD 44.1 billion in the reporting quarter due to a larger increase in merchandise imports relative to exports," the central bank said in a statement.

On a cumulative basis, CAD more than doubled to 1.9 per cent of GDP in the April-December 2017 period from 0.7 per cent in the corresponding period of 2016-17 due to wider trade deficit, which increased to USD 118.9 billion from USD 82.7 billion.

Net services receipts rose 17.8 per cent during the reporting quarter mainly on the back of a rise in net earnings from software services and travel receipts.

Private transfer receipts, mainly representing remittances amounted to USD 17.6 billion, an increase of 16 per cent over a year ago.

In the financial account, net foreign direct investment stood at USD 4.3 billion, almost 55 per cent less than in the year-ago period when it was at USD 9.7 billion, the apex bank data showed.

However, net portfolio investment inflows were in the green at USD 5.3 billion in Q3, compare to an outflow of USD 11.3 billion in the year-ago period, due to net purchases in both the debt and equity markets.

Net receipts on account of non-resident deposits amounted to USD 3.1 billion in the reporting quarter as against net repayments of USD 18.5 billion a year ago.

During the three months to December 2017, the forex kitty swelled by USD 9.4 billion (on balance of payment basis) as against a depletion of USD 1.2 billion in Q3 of FY17.

During this period, forex kitty saw an accretion USD 30.3 billion to the foreign exchange reserves.

Net FDI inflows during April-December 2017 declined to USD 23.7 billion from USD 30.6 billion, while net portfolio inflows stood at USD 19.8 billion during the period as against a net outflow of USD 3.2 billion a year ago.

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