India’s current account deficit (CAD), the difference between the value of all imports and the value of all exports, has widened in the third quarter (October-December) of 2016-17, to $7.9 billion or 1.4 percent of GDP as compared to $7.1 billion or 1.4 percent of GDP in the same quarter of 2015. The CAD expanded primarily on account of a decline in net invisibles receipts despite a slightly lower trade deficit on a year-on-year basis.
As per the data released by Reserve Bank of India (RBI), during April-December 2016, the CAD narrowed to 0.7 percent of GDP from 1.4 percent in April-December 2015, on the back of the contraction in the trade deficit. India's trade deficit narrowed to $82.8 billion in April-December 2016 as compared to $105.3 billion in April-December 2015. It said that private transfer receipts, mainly representing remittances by Indians employed overseas registered a decline of 3.8 percent amounting to $15.2 billion, from the previous level a year ago.
In the year 2016-17, net services receipts moderated on a y-o-y basis, mainly due to the fall in earnings from software, financial services and charges for intellectual property rights. In the financial account, net foreign direct investment at $9.8 billion in Q3 of 2016-17 was marginally lower than its level a year ago. On the other hand, portfolio investment recorded a net outflow of $11.3 billion in Q3 of 2016-17 as against $0.6 billion net inflow in the year-ago period.
Meanwhile, reflecting the redemption of Foreign Currency Non Resident (FCNR) (B) deposits, Non-resident Indian (NRI) deposits declined to $18.5 billion in Q3 of 2016-17 as against an inflow of $1.6 billion in the year-ago period. In Q3 of 2016-17, foreign exchange reserves (on BoP basis) declined by $1.2 billion as against an increase of $4.1 billion in Q3 of last year.