India's current account deficit (CAD) in the January-March quarter of FY23 narrowed to $1.3 billion, accounting for 0.2 percent of the country's GDP, according to the latest data released by the Reserve Bank of India (RBI) on Tuesday, June 27. This positive development was primarily attributed to a reduction in the trade deficit and a significant increase in services exports.
In comparison to the previous quarter, where the CAD stood at $16.8 billion (2 percent of GDP), and the corresponding quarter of the previous year, where it was $13.4 billion (1.6 percent of GDP), the current figures demonstrate a considerable improvement in India's balance of payments, according to a statement by RBI.
CAD is a key indicator of the balance of payment of a country.
The decline in CAD during the fourth quarter of the last fiscal year was primarily driven by a decrease in the trade deficit from $71.3 billion to $52.6 billion. Additionally, there was a notable boost in net services receipts, both sequentially and on a year-on-year basis, primarily due to increased earnings from computer services, as stated by the RBI.
Furthermore, India experienced an increase in foreign exchange reserves during the quarter, with an accumulation of $5.6 billion on a balance of payments basis, contrasting the depletion of $16 witnessed in the fourth quarter of 2021-22.
However, for fiscal 2022-23, the current account balance recorded a deficit of 2 percent of GDP compared to a deficit of 1.2 percent in 2021-22, as the trade deficit widened to $265.3 billion from $189.5 billion a year ago.
