Current Account Deficit Shrinks Sharply In Last October-December Quarter

India's current account deficit (CAD) narrowed further in the final quarter of 2019 on the back of a contraction in the trade deficit and rise in net services receipts, the central bank said on Thursday. The CAD also declined to 0.2 per cent of gross domestic product in the third quarter of the fiscal year ending this month from 2.7 per cent in the year-ago period. On a quarterly basis, it shrank from 0.9 per cent of GDP in Q2.

The deficit measures the difference between the value of a country's imported and exported goods and services.

"The contraction in the CAD (in 2019 Q4) was primarily on account of a lower trade deficit at $34.6 billion and a rise in net services receipts at $21.9 billion," the Reserve Bank of India said in a statement.

India's monthly trade deficit however widened to $15.17 billion in January compared with $14.73 billion a year earlier, and sharply higher versus the deficit of $11.25 billion in December, trade ministry data last month showed.

Data last month showed annual economic growth slowed to a a more-than-six-year low of 4.7 per cent in the December quarter.

The current account deficit stood at $1.4 billion in the last quarter of 2019 versus $17.7 billion a year ago. The merchandise trade deficit narrowed to $34.6 billion from $49.3 billion, the central bank said.

Balance of payments stood at a surplus of $21.6 billion in Q3 of 2019-20 compared with a deficit of $4.3 billion a year ago, data showed. However, the surplus ballooned from $5.1 billion seen in Q2.

Foreign portfolio investment recorded net inflow of $7.8 billion in Q3 of 2019-20 - as against an outflow of $2.1 billion in the same quarter last year – on account of net purchases in both the debt and equity market, the RBI said.