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India’s Current Account Deficit Rises Sharply To 2.4% Of GDP, Widens Trade Gap

India’s Current Account Deficit Rises Sharply To 2.4% Of GDP, Widens Trade Gap

Mumbai: India’s current account deficit (CAD) rose sharply to USD 14.3 billion — or 2.4 per cent of GDP — at the end of first quarter of 2017-18, mainly on account of an increased trade gap.

CAD stood at USD 0.4 billion, or 0.1 per cent of GDP, in April-June of 2016-17. The figure compares with USD 3.4 billion (0.6 per cent) for the quarter ended March 2017.

“The widening of CAD on a year-on-year (y-o-y) basis was primarily on account of a higher trade deficit (USD 41.2 billion) brought about by a larger increase in merchandise imports relative to exports,” said the Reserve Bank (RBI) while issuing the document on Developments in India’s Balance of Payments during April-June of 2017-18.

In general terms, CAD refers to the difference between inflow and outflow of foreign exchange that has a bearing on exchange rate.

During the period, private transfer receipts, mainly remittances by Indians employed overseas, at USD 16.1 billion went up 5.3 per cent over the same quarter of the previous year. Net services receipts, too, increased 15.7 per cent on a y-o-y basis, on the back of a rise in net earnings from travel, construction and other business services.

In the financial account, net foreign direct investment at June-end almost doubled to USD 7.2 billion in comparison to the inflows in the same period last fiscal. The data showed that net portfolio investment recorded substantial inflow of USD 12.5 billion, primarily in the debt segment.

The RBI further said that in the June quarter this fiscal, there was an accretion of USD 11.4 billion to the foreign exchange reserves compared to USD 7 billion in the corresponding three months of the previous fiscal.

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