As a percentage of GDP, the CAD, which arises when a country’s total imports of goods, services and transfers are greater than exports, in the reporting quarter was at 0.1 per cent, against 1.2 per cent in the year-ago quarter.
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India’s current account deficit (CAD) sharply declined to United States dollars 0.3 billion in the first quarter (April-June) of 2016-17 from USD 6.1 billion in the same quarter of 2015-16, the Reserve Bank of India (RBI) said on Wednesday.
On the other hand, portfolio investment, recorded a net inflow of $2.1 billion (Rs 13,265.7 crore) in Q1 of 2016-17 as against a marginal outflow in the corresponding period of past year and an outflow of $1.5 billion (Rs 9,475.5 crore) in the preceding quarter, primarily reflecting net inflow in the equity component. We had anticipated a surplus of $4.4 billion for the quarter. Gold imports declined to $3.9 billion from $ 7.5 billion in the first quarter of past year. This is because despite falling merchandize exports, stagnant software earnings and decline in remittances the current account deficit has fallen to a low $ 0.3 billion which is only 0.1% of the GDP.
Meanwhile, the balance of payments posted a surplus of US$7.0 billion for the April-June quarter, down from an US$11.4 billion surplus a year ago, the RBI data showed.
A host of brokerages and analysts were estimating the country may post its first current account surplus in nearly a decade on the back of contraction in imports. Now they expect the country to post a surplus in the second quarter of the fiscal. Capital inflows (FDI, FII, NRI deposits and ECBs) improved slightly in July 2016.
Current Account Deficit (CAD), or the difference between inflow and outflow of foreign exchange, came in at 1.1% of GDP in 2015-16, 1.3% in 2014-15, 1.7% in 2013-14 and a record high of 4.8% of GDP in 2012-13. “However, these remain lower year-to-date as compared to year-ago levels”, said a Religare report. Anubhuti Sahay, economist at Standard Chartered Bank, observed that the slowdown in remittances and services exports – both at lowest levels since 2011 – reflected weak external demand. The rating agency expected the current account deficit at $20-25 billion in FY17 against $22 billion in FY16.
“The sharp narrowing of the trade balance suggests that Q2 2016 will record its first quarterly current account surplus in nine years”.
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Net foreign direct investments shrunk 57% to $4.1 billion from $10 billion a year ago which led to the overall capital account surplus shrunk to $7.1 billion during the latest quarter from $ 8.6 billion in the same period a year ago.
