The Reserve Bank of India (RBI) has revealed that the current account deficit (CAD) widened to $7.9 billion in the Oct.-Dec. quarter of the current financial year.
The current CAD is 1.4% of GDP as compared with $3.4 billion, or 0.6%, recorded in the preceding quarter. CAD was $7.1 billion in the third quarter of the fiscal 2015-16.
The RBI has claimed that the rise in the CAD is due to the decline in net invisibles receipts despite a slightly lower trade deficit on a year-on-year basis.
The central bank said that “Net services receipts moderated on a y-o-y basis, primarily owing to the fall in earnings from software, financial services and charges for intellectual property rights. Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $15.2 billion, having declined by 3.8% from a year ago.”
Analysts believe that the Q3 CAD is a positive surprise as the expectations related to the size of the deficit were higher due to the pressure exerted by higher gold imports and crude oil prices.
RBI also said that workers’ remittances by overseas Indians, after picking up in Q2 at $9 billion, again declined marginally in Q3 to $8.9 billion.
India’s external sector position has been comfortable despite moderation in India’s exports, with the CAD progressively contracting from $ 88.2 billion (4.8% of GDP) in 2012-13 to $ 22.2 billion (1.1% of GDP) in 2015-16.