India's Current Account Deficit Narrows On YoY Basis To $9.2 Billion In Q1FY24

India's current account deficit (CAD) reached $9.2 billion, or 1.1% of GDP, in the first quarter of 2023-24 on a sequential basis, owing to a higher trade deficit coupled with a lower surplus in net services and a decline in private transfer receipts. In Q1FY23, India's CAD recorded a deficit of $17.9 billion, or 2.1% of GDP in Q1FY23. The CAD in January-March was $1.3 billion, or 0.2% of GDP.

It has widened from $1.3 billion, or 0.2% of GDP, seen in the preceding quarter.

On Thursday, the RBI said, "The widening of CAD on a quarter-on-quarter basis was primarily on account of a higher trade deficit coupled with a lower surplus in net services and decline in private transfer receipts."

Data released earlier this month showed that India's trade deficit rose to the highest since October last year as rising oil prices and resilient domestic demand resulted in an inflated import bill. The difference between exports and imports stood at $24.16 billion in the month of August, data showed.

A widening trade balance can lead to an expansion in the current account deficit, which is a larger measure for trade in goods and services.

Meanwhile, in a separate press release, the RBI today said that India's external debt at the end of June 2023 was placed at US$ 629.1 billion, recording an increase of US$ 4.7 billion over its level at end-March 2023. The external debt to GDP ratio declined to 18.6% at end-June 2023 from 18.8% at the end of March 2023.

The valuation effect due to the appreciation of the US dollar vis-à-vis the major currencies such as yen and SDR amounted to US$ 3.1 billion. Excluding the valuation effect, external debt would have increased by US$ 7.8 billion instead of US$ 4.7 billion at end-June 2023 over end-March 2023.