Current account deficit swells to 9-year high of $36.4 billion in Q2

India's current account deficit widened to a 9-year high of $36.4 billion, or 4.4 percent of GDP, in the second quarter of the current financial year, mainly on account of a higher trade deficit.

As per data released by the Reserve Bank of India (RBI) on the country's balance of payments during the second quarter (July-September) of 2022-23, the current account balance of $36.4 billion is double the $18.2 billion (2.2 percent of GDP) posted in April-June period of the first quarter and nearly four times of what it was in the second quarter of FY22.

The previous record for the highest CAD was $31.77 billion, posted in the third quarter of 2012-13. For 2021-22 as a whole, the CAD was $38.77 billion.

"Underlying the current account deficit in Q2:2022-23 was the widening of the merchandise trade deficit to $83.5 billion from $63.0 billion in Q1:2022-23 and an increase in net outgo under investment income," the RBI said.

It also said services exports reported a growth of 30.2 percent on a year-on-year basis on the back of rising exports of software, business and travel services. Net services receipts increased both sequentially and on a year-on-year basis.

There was a depletion of foreign exchange reserves (on a BoP basis) to the tune of $30.4 billion in the second quarter of 2022-23 as against an accretion of $31.2 billion in the second quarter of 2021-22. In the first half of 2022-23, there was a depletion of $25.8 billion to the foreign exchange reserves (on a BoP basis), the RBI said.

The private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $27.4 billion, an increase of 29.7 percent from their level a year ago. In the financial account, net foreign direct investment decreased to $6.4 billion from $8.7 billion a year ago.

The net foreign portfolio investment recorded inflows of $6.5 billion, up from $3.9 billion during the second quarter of 2021-22. The net external commercial borrowings to India recorded an outflow of $0.4 billion in the second quarter of 2022-23 as against an inflow of $ 4.3 billion a year ago.