Current account deficit widens to $23.9 billion but below estimate

India's current account deficit (CAD), a key indicator of the balance of payment (BoP) position, widened to 2.8 per cent of GDP at $23.9 billion in the first quarter of the current financial year, mainly on account of a higher trade deficit.

As per the data released by the Reserve Bank on India's balance of payments during the first quarter (April-June) of 2022-23, the current account balance recorded a deficit of $23.9 billion (2.8 percent of GDP) in the first quarter, up from $13.4 billion (1.5 percent of GDP) in January-March period of the last fiscal.

Speaking to CNBC-TV18, Upasna Bhardwaj, Senior Economist at Kotak Mahindra Bank said, “It is definitely a pleasant surprise, we were expecting a 3.7 per cent as the current account deficit number, and clearly, as you mentioned, I think the surprise is on the services segment". She added, "I don't think we have seen this kind of a discrepancy between the monthly releases versus the quarterly BoP numbers in the recent past that I can recall. That is exactly where the biggest surprise has come.”

According to her, the second quarter CAD could be above 5 per cent of GDP. "Because of the first quarter, the numbers will be revised for us as well. But the trend going ahead doesn't necessarily change. The external sector headwinds still remain", opined Bhardwaj.

India's current account surplus stood at $6.6 billion, equivalent to 0.9 percent of GDP in the first quarter (April-June) of 2021-22.

"Underlying the current account deficit in Q1: 2022-23 was the widening of the merchandise trade deficit to $68.6 billion from $54.5 billion in Q4: 2021-22 and an increase in net outgo of investment income payments," the RBI said.

It also said net services receipts increased, both sequentially and on a year-on-year (y-o-y) basis, on the back of rising exports of computer and business services.

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