CAD narrows to 0.9% of GDP in July-Sept on lower trade deficit: RBI


MUMBAI: The slowdown in the economy has helped in a better external sector balance sheet. India’s current account deficit(CAD) excess of imports over exports contracted to 0.9 per cent of its GDP for the quarter ended September 2019, compared to a deficit of 2.9 per cent of GDP, in the same period of year ago as the trade deficit contracted due to slowdown in imports and lower oil prices.

In absolute terms, CAD a was at $ 6.3 billion or 0.9 per cent of GDP during July-September 2019, compared to $ 19.0 billion or 2.9 per cent of GDP during July-September 2018 and $ 14.2 billion (2.0 per cent of GDP) in the preceding quarter ending June 2019, according to the preliminary numbers released by the Reserve Bank of India on Tuesday. “The contraction in the CAD was primarily on account of a lower trade deficit at $ 38.1 billion as compared with $ 50.0 billion a year ago” RBI said in a release.

Also, private transfer receipts, mainly representing remittances by Indians employed overseas, rose to $ 21.9 billion, increasing by 5.2 per cent from their level a year ago, besides software services income too rose to $21 billion during the quarter compared to $19 billion in the year ago period.


“Reflecting the anticipated decline in the merchandise trade deficit, the current account deficit is forecast by ICRA to narrow sharply to $34-36 billion (1.2% of GDP) in FY2020 from US$57.2 billion in FY2019 (2.1% of GDP)” said Aditi Nayyar, principal economist at ratings firm Icra.

For the first half of the current fiscal, CAD narrowed to 1.5 per cent of GDP from 2.6 per cent in the first half of FY’18-19 on the back of a reduction in the trade deficit which shrank to $ 84.3 billion in April-September 2019 from $ 95.8 billion in April-September 2018.

In the capital account, the overall surplus declines to $12 billion during April-June 2019, compare to inflows worth $16.3 billion in the same period a year ago. This was largely due to a slowdown in net inflows through foreign investment and loans during the quarter.

The overall balance of payments ended in a surplus of $5.1 billion compared to a deficit of $1.8 billion in the same period a year ago.

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