Current Account Deficit Widens To Four-Year High in Q1 Of FY18

The CAD came in at $14.3 billion in the April-June quarter of 2017-18 as compared to $0.4 billion in the corresponding quarter of 2016-17.

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Current Account Deficit Widens To Four-Year High in Q1 Of FY18

Spike in gold imports prior to GST introduction was responsible for half of the uptick in CAD, says ICRA.

The country's current account deficit increased sharply to 2.4 per cent of the gross domestic product (GDP) in the first quarter of FY18, from 0.1 per cent a year ago, primarily on account of a higher trade deficit, Reserve Bank of India (RBI) said on Friday. The CAD came in at $14.3 billion in the April-June quarter of 2017-18 as compared to $0.4 billion in the corresponding quarter of 2016-17.

Meanwhile, in a separate set of data, exports rose 10.29 per cent to $23.81 billion in the month of August while the trade deficit widened to $11.64 billion.

Net services receipts increased by 15.7 per cent on a year-on-year basis mainly on the back of a rise in net earnings from travel, construction and other business services, the Reserve Bank said in a press release.

Private transfer receipts, mainly representing remittances by Indians employed overseas at $16.1 billion, increased by 5.3 per cent in the first quarter of FY18 as compared to the corresponding period of previous year.

In the financial account, net foreign direct investment at $7.2 billion in the first quarter of 2017-18 almost doubled from its level in the corresponding quarter of 2016-17.

Credit rating agency ICRA said that the CAD increase did not come as a surprise. "The spike in gold imports prior to the introduction of GST was responsible for half of this uptick. Moreover, the lagged impact of the Indian rupee appreciation was partly responsible for a faster rise in non-oil non-gold imports relative to exports, bloating the size of the merchandise trade deficit," said Aditi Nayar, Principal Economist, ICRA.

Net portfolio investment recorded a substantial inflow of $12.5 billion in the first quarter of 2017-18, primarily in the debt segment, as compared with $2.1 billion in the corresponding quarter last year.

Net receipts on account of non-resident deposits amounted to $1.2 billion in Q1 of 2017-18, lower than $1.4 billion in the corresponding period a year ago.

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Meanwhile, the forex reserves surged by $2.604 billion to reach an all-time high of $400.726 billion in the week ended September 8 on account of rise in foreign currency assets. (With Agency Inputs)

 

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