MUMBAI: Driven a sharper fall in imports and a marginal fall in exports helped the economy narrow trade deficit, which along with robust services exports helped it report a current account surplus of $5.7 billion or 0.6 percent of GDP in the fourth quarter of the fiscal 2024 –frist time in 10 quarters, compared to a deficit of $1.3 billion or 0.2 percent in the year-ago quarter, according to the latest RBI data.
In the December 2023 quarter the current account deficit stood at $8.7 billion or 1 percent of GDP, according to the latest data.
The current account logged a surplus in the March quarter largely due to higher services, the Reserve Bank said Monday.
The current account surplus stood at $5.7 billion in the fourth reporting quarter as against a deficit of $8.7 billion or 1 percent of GDP in the preceding quarter.
For the full yearm, the deficit narrowed sharply to $23.2 billion, or 0.7 percent of GDP, this is lowest in seven years, as against $67 billion or 2 percent of GDP in FY23, the central bank siad.
The 0.6 percent surplus in the March quarter marks a significant improvement from the year-ago period, where the country had a current account deficit of $1.3 billion or 0.2 per cent of GDP.
During the March quarter, net outgo on the primary income account, primarily reflecting payments of investment income, increased to $ 14.8 billion from $ 12.6 billion a year ago, the RBI said.
Private transfer receipts, mainly representing remittances, amounted to $32 billion, an increase of 11.9 percent on-year, it added. In the financial account, net foreign direct investment flows were $2 billion compared to $6.4 billion a year ago, said the central bank.
Foreign portfolio investment saw a net inflow of $11.4 billion as against a net outflow of $1.7 billion on-year. Net inflows under external commercial borrowings to amounted to $2.6 billion in Q4:2023-24 as compared with $1.7 billion a year ago, the RBI said.
Non-resident deposits saw a higher net inflow of $5.4 billion which was only $3.6 billion a year ago.
Commenting on the numbers, Aditi Nayar, the chief economist at Icra Ratings told TNIE that the current account turned in a welcome surplus after a gap of 10 quarters, with the same size of $5.7 billion.
The turnaround to a surplus in Q4 from a deficit in the year-ago period is primarily driven by a narrowing in the merchandise trade deficit to a 10-quarter low of $50.9 billion in Q4 from $69.9 billion in Q3FY24, she said.
Aided by a narrower merchandise trade deficit and a robust expansion in the services trade surplus, the current account deficit more than halved to a seven-year low of $23.2 billion in FY24 from $67 billion in FY23. As a proportion of GDP, it eased to a mild 0.7 percent from 2 percnet in FY23, she said.
She said her agency expects the CAD to rise slightly in FY25, while remaining eminently manageable at 1.0-1. Percent of GDP, owing to a widening in the merchandise trade deficit in this fiscal, on the back of domestic demand and higher commodity prices, especially if the crude prices average at $85 a barrel.