CAD narrows as remittances dip

MUMBAI: India unexpectedly posted a slight current account deficit in the April-June quarter, contrasting with expectations that it would post the first surplus

MUMBAI: India unexpectedly posted a slight current account deficit in the April-June quarter, contrasting with expectations that it would post the first surplus in nine years, as expatriate remittances declined.

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Reserve Bank of India data on Wednesday showed the country posted a current account deficit (CAD) of $300 million, or 0.1% of gross domestic product (GDP), in the period. Expectations were for a $4 billion surplus — which would have been the first positive balance since the first three months of 2007.

The deficit, however, was much less than the $6.1 billion, or 1.2% of GDP, a year ago.

Private transfer receipts, which reflect remittances, fell to $15.2 billion in April-June versus $16.3 billion a year ago, according to the RBI data.

“We expect the remittances from Indians mostly staying in West Adian countries to remain sluggish, which means the CAD for the full fiscal is likely to be nearly one percent and not below one percent of GDP as earlier expected,” said A Prasanna, economist at ICICI Securities Primary Dealership.

Analysts say the gap could signal trouble spots in one of the fastest growing economies as growth is well below the 8% needed to fill job gaps.

Wednesday’s data showed imports slumped in the April-June quarter, even as exports stayed subdued, narrowing the trade deficit to $23.8 billion from $34.2 billion a year ago.

India’s overall balance of payment surplus narrowed to $7.0 billion from $11.4 billion a year ago — still a third straight quarter of surplus.