India's current account deficit (CAD) widened to $15.8 billion, which is around 2.4 per cent of the country's Gross Domestic Product (GDP), in the quarter ending June as compared with $15 billion in the same quarter a year before. The weakening rupee against the US dollar and high crude-oil prices in the international market have swelled the current account deficit in the first quarter.
The domestic currency has been Asia's worst performing currency so far this year, touching 72 on Thursday and closing at 71.7 on Friday. The rupee breached the 72 mark against the US dollar for the first time ever on Thursday. The currency, which was around Rs 63.38 on January 1, has depreciated by 13.6 per cent slump since the start of the year.
The trade shortfall of 2.5 per cent of the GDP in Q1 is more than the Jan-March quarter when it accounted for 1.9 per cent of the GDP. The widening trade gap on a year-on-year (y-o-y) basis was primarily on account of a higher trade deficit at $45.7 billion as compared with $ 41.9 billion a year ago, the RBI report said.
The Central bank has been consistently depleting its foreign assets to support the currency. The RBI data shows that in Q1 of 2018-19, there was a depletion of $11.3 billion of the foreign exchange reserves (on BoP basis) as against an accretion of $11.4 billion in Q1 of 2017-18.
Experts cite high crude oil prices, boost in non-crude and non-gold imports as major reasons for a high CAD. The data from the RBI also shows that on account of net sales in both the debt and equity markets, foreign portfolio investment recorded a net outflow of $8.1 billion in Q1 of FY19 as compared with an inflow of $12.5 billion during the same period a year ago.
Net services receipts also increased by 2.1 per cent on a y-o-y basis on the back of a rise in net earnings from software and financial services. Private transfer receipts, representing remittances by Indians employed overseas, amounted to $18.8 billion, increasing by 16.9 per cent from their level a year ago.
(Edited by Manoj Sharma)