First-quarter CAD in line with estimates

The country's current account deficit (CAD) widened to $15.8 billion, or 2.4 per cent of its GDP, during the first quarter of the current financial year, data released by the Reserve Bank of India (RBI) showed on Friday.

By Our Special Correspondent in Mumbai
  • Published 8.09.18
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Mumbai: The country's current account deficit (CAD) widened to $15.8 billion, or 2.4 per cent of its GDP, during the first quarter of the current financial year, data released by the Reserve Bank of India (RBI) showed on Friday.

Though the CAD was higher than $13 billion, or 1.9 per cent of GDP, in the fourth quarter of the preceding year, the current numbers were in line with analyst estimates.

With the rupee coming under intense pressure in recent times and part of its fall attributed to worries over a widening CAD, the April-June number was being keenly watched.

The CAD, which shows the difference between foreign exchange earned and spent, stood at $15 billion, or 2.5 per cent of GDP, in the first quarter of 2017-18.

Rating agency Icra had earlier forecast that the CAD for the first quarter of this financial year could come in at $16-17 billion, or 2.5 per cent of GDP. Amid rising crude oil prices and other factors such as portfolio outflows, few experts are of the view that the CAD could touch 2.8 per cent of GDP this year.

"Overall, we expect the CAD to widen to 2.8 per cent of GDP in 2018-19 from 1.9 per cent in 2017-18," Japanese financial services major Nomura said in a report earlier. It added that the balance of payment funding could remain a challenge in the current year.

According to the RBI, the widening of the CAD on a year-on-year basis was primarily on account of a higher trade deficit at $45.7 billion compared with $41.9 billion a year ago.

The central bank pointed out that net services receipts increased 2.1 per cent to $18.7 billion over the same period last year mainly on the back of a rise in net earnings from software and financial services.

On the other hand, private transfer receipts, which largely represented remittances by Indians employed overseas, stood at $18.8 billion and rose almost 17 per cent from their level a year ago.

However, in the capital account, while net foreign direct investment at $9.7 billion during the period was higher than $7.1 billion in the first quarter of 2017-18, portfolio investment took a hit as they recorded a net outflow of $8.1 billion compared with an inflow of $12.5 billion in the year-ago period on account of net sales in both the debt and equity markets.