India’s Q3 CAD widens to 1.4% of GDP on sluggish services exports: RBI | business-news | Hindustan Times
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India’s Q3 CAD widens to 1.4% of GDP on sluggish services exports: RBI

business Updated: Mar 23, 2017 19:15 IST
Raj Kumar Ray
current account deficit

Goods being uploaded in a ship at a port(HT photo)

India’s current account deficit (CAD) widened to 1.4% from 0.6% of the country’s gross domestic product in the October to December quarter, owing to slowing services exports, including that of software, according to data collated by Reserve Bank of India.

The gap between exports and imports of goods and services was $7.9 billion in the third quarter of 2016-17, tad higher than $7.1 billion (1.4% of GDP) the previous year. On a sequential quarter-basis the gap doubled from $3.4 billion (0.6% of GDP).

“Despite a slightly lower trade deficit on a year-on-year basis, the CAD widened primarily on account of a decline in net invisible receipts. Net services receipts moderated on a y-o-y basis, primarily owing to the fall in earnings from software, financial services and charges for intellectual property rights.

Private transfer receipts mainly remittances by Indians employed overseas were at $15.2 billion, down 3.8% from a year ago.

In the financial account, net foreign direct investment (FDI) was at $9.8 billion in Q3 of 2016-17 was marginally lower than its level a year ago.

“There has been net outflow of portfolio investment to the tune of $11.3 billion as against net inflow of $0.6 billion in Q3 of last year,” RBI said.

With redemption of foreign currency non-resident bank FCNR (B) deposits, non-resident Indian (NRI) deposits declined by $18.5 billion in Q3 of 2016-17 as against an inflow of $1.6 billion a year ago.

During the December quarter, the foreign exchange reserves declined by $1.2 billion as against an increase of $4.1 billion in Q3 of last year.

During April-December, the CAD narrowed to 0.7% of GDP from 1.4% in the same period of 2015-16, on the back of the contraction in the trade deficit.

India’s trade deficit narrowed to $82.8 billion in April-December 2016 from $105.3 billion in April-December 2015. “Net invisible receipts were lower, mainly due to moderation in software exports and net private transfers and higher outgo on account of primary income such as profit, interest and dividends,” RBI said.

FDI inflows during April-December 2016 were at $30.6 billion, which was up by 12.3% over the same period of last year.

Portfolio investment recorded a net outflow of $3.2 billion during April-December 2016 as compared with $3 billion a year ago.

In April-December 2016, there was an increase of $14.2 billion to the foreign exchange reserves.