The country’s current account deficit (CAD) for the January-March period narrowed to 0.7% of the GDP, or $4.6 billion, compared with 1.8%, or $ 13 billion recorded during the same period of the previous year. The deficit narrowed due to a lower trade deficit.
The current account deficit was $17.7 billion, or 2.7% of the GDP, in the preceding quarter.
“The contraction of the CAD on a year-on-year basis was primarily on account of a lower trade deficit at $35.2 billion as compared with $41.6 billion a year ago,” the Reserve Bank of India said.
Net services receipts increased by 5.8% year on year, mainly on the back of a rise in net earnings from telecommunications, computer and information services.
While foreign portfolio investments recorded a net inflow of $9.4 billion, compared with $2.3 billion, on account of net purchases in both debt and equity markets, foreign direct investment at $6.4 billion during the January-March period was at the same level of the fourth quarter of the previous financial year.
For the full financial year 2018-19, CAD increased to 2.1% of the GDP in 2018-19 from 1.8% in 2017-18 on the back of a widening trade deficit. The country’s trade deficit increased to $180.3 billion in 2018-19 from $160 billion in 2017-18.
Forex reserves
The country’s foreign exchange reserves hit a record high of $426.41 billion for the week ended June 21, latest data from Reserve Bank of India showed.
The previous high was attained on April 13, 2018 when it was $426.08 billion.
During the week ended June 21, foreign exchange reserves swelled by a whopping $4.2 billion.
The increase in foreign currency reserves is due to an increase in foreign currency assets of similar magnitude.