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Here's Why June Quarter Current Account Deficit Is At Four-Year High

"The widening of the CAD on a year-on-year basis was primarily on account of a higher trade deficit, which was at $41.2 billion," said RBI.

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Here's Why June Quarter Current Account Deficit Is At Four-Year High

Balance of payments for April-June 2017 stood at $11.40 billion against $6.969 billion on a YoY basis.

The current account deficit for the April-June quarter widened to its highest in four years as imports surged, but strong capital inflows comfortably financed the gap, news agency Reuters reported. The current account deficit widened to 2.4 per cent of gross domestic product (GDP), or $14.3 billion, as compared to $0.4 billion in the corresponding period a year ago, RBI said in a press release. On a sequential basis, the current account deficit also widened from $3.4 billion or 0.6 per cent of GDP in the fourth quarter of fiscal 2017. Here are 10 things that you must know about the current account deficit:

1) The current account deficit is a measurement of a country’s trade where the value of the goods and services it imports exceeds the value of the goods and services it exports. It also includes net income, such as interest and dividends, and transfers, like foreign aid.

2) "The widening of the CAD on a year-on-year basis was primarily on account of a higher trade deficit, which was at $41.2 billion,” said RBI. It was brought about by a larger increase in merchandise imports relative to exports, it added.

3) In the quarter ending in June last year, the current account deficit was 0.1 per cent or $401 million. It is now at its highest level since the June quarter of 2013.

4) The balance of payments for the April-June quarter stood at $11.40 billion as against $6.969 billion in the year-ago period.

5) The net foreign direct investment at $7.2 billion in the reported quarter almost doubled from its level in the same period last year.

6) Net portfolio investment recorded a substantial inflow of $12.5 billion in quarter, primarily in the debt segment, as compared to $2.1 billion in first quarter of last year.

7) Net services receipts rose 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.

8) Private transfer receipts, mainly representing remittances by Indians employed overseas, at $16.1 billion increased by 5.3 per cent over the corresponding quarter of previous year.

9) In April-June quarter, there was an accretion of $11.4 billion to the foreign exchange reserves as compared to $7 billion in the year-ago quarter and $7.3 billion in the fourth quarter of fiscal 2017.

10) "It appears the last month's transition to GST had affected some export sectors, but that is expected to normalise going ahead," said A Prasanna, economist at ICICI Securities Primary Dealership. Expect the full year current account deficit to be 1.5 per cent of GDP, he added. (With Agency Inputs)
 

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