India’s current account deficit (CAD) dropped to $23.2 billion (0.7% of GDP) during the 2023-24 fiscal year, a significant decrease from the $67 billion (2% of GDP) recorded the previous year, the Reserve Bank of India (RBI) reported on Monday. This improvement is attributed to a reduced merchandise trade deficit.
The reduction in CAD highlights a strengthening of India's economic fundamentals, as the financial year ending March 31 saw a $63.7 billion increase in foreign exchange reserves.
Net receipts from invisibles were higher in 2023-24 than the previous year, driven mainly by services and transfers. Portfolio investment in the capital markets showed a net inflow of $44.1 billion, reversing from a $5.2 billion outflow the previous year. However, net foreign direct investment (FDI) inflow fell to $9.8 billion from $28 billion in 2022-23.
The RBI data also indicated a current account surplus of $5.7 billion (0.6% of GDP) for the January-March quarter of 2023-24, compared to a deficit of $8.7 billion (1% of GDP) in the preceding October-December quarter and $1.3 billion (0.2% of GDP) in the fourth quarter of 2022-23. This improvement reflects India's enhanced macroeconomic position.
The merchandise trade deficit stood at $50.9 billion in Q4 2023-24, slightly down from $52.6 billion the previous year.
Services exports increased by 4.1% year-on-year in Q4 2023-24, boosted by rising exports in software, travel, and business services. Net services receipts were $42.7 billion, up from $39.1 billion a year ago, contributing to the current account surplus.
Private transfer receipts, mainly remittances from Indians working abroad, rose by 11.9% to $32.0 billion. However, the net outgo on the primary income account, primarily investment income payments, increased to $14.8 billion from $12.6 billion a year earlier.
In the financial account, net FDI flows were $2.0 billion in Q4 2023-24, down from $6.4 billion a year earlier. Foreign portfolio investment saw a net inflow of $11.4 billion in Q4 2023-24, compared to a net outflow of $1.7 billion in Q4 2022-23.
Net inflows from external commercial borrowings reached $2.6 billion, up from $1.7 billion the previous year, and non-resident deposits saw a higher net inflow of $5.4 billion, compared to $3.6 billion in Q4 2022-23.
Foreign exchange reserves increased by $30.8 billion in Q4 2023-24, a substantial rise from the $5.6 billion accretion a year earlier.
Follow us
