India’s current account deficit
(CAD) in the July-September quarter (Q2) of 2019-20 fiscal year contracted to 0.9 per cent of the gross domestic product (GDP), from 2.0 per cent in Q1, primarily on account of lower trade deficit, the data released by the Reserve Bank of India (RBI) showed. In the year-ago period, the CAD was at 2.9 per cent of the GDP.
In absolute terms, the CAD came at $6.3 billion in Q2FY20, from $19.0 billion in the year-ago period, and $14.2 billion in the preceding quarter. The trade deficit in Q2 was at $38.1 billion, as against $50.0 billion a year ago. Net services receipts increased by 0.9 per cent on a YoY basis, on the back of a rise in net earnings from computer, travel, and financial services. Private transfer receipts, mainly remittances by Indians employed overseas, rose to $ 21.9 billion, increasing by 5.2 per cent from their level a year ago, the RBI said. Net foreign direct investment was $7.4 billion, almost same level as in Q2FY19. Foreign portfolio investment recorded net inflow of $2.5 billion, against an outflow of $1.6 billion in the year-ago quarter, due to higher flow in the debt market.
External commercial borrowing was up at $3.2 billion, against $2.0 billion in the year-ago quarter. The foreign exchange reserves got a boost of $5.1 billion in Q2. In the 2019-20 half year period, the CAD narrowed to 1.5 per cent of GDP, from 2.6 per cent in the first half a year ago. Trade deficit in this period shrank to $84.3 billion, from $95.8 billion in the first half of the last fiscal year.