Raising concern over the fiscal condition, the Reserve Bank of India’s (RBI) latest data has showed that India’s current account deficit (CAD) doubled to 1.2 percent of gross domestic product (GDP) or $ 7.2 billion in July-September, from 0.6 percent of GDP or $ 3.4 billion reported in the same period a year ago. However, as per the RBI data,the CAD at $ 7.2 billion in Q2 of 2017-18 narrowed sharply from $ 15.0 billion or 2.5 per cent of GDP in the preceding quarter. On a cumulative basis, the CAD increased to 1.8 per cent of GDP in H1 of 2017-18 from 0.4 per cent in H1 of 2016-17.
The RBI further in its release said that the widening of the CAD on a year-on-year basis was primarily on account of a higher trade deficit brought about by a larger increase in merchandise imports relative to exports. India’s trade deficit increased to $ 74.8 billion in H1 of 2017-18 from $ 49.4 billion in H1 of 2016-17.
However, despite a wider current account deficit, India`s balance of payments posted a surplus of $ 9.5 billion in July-September compared with $ 8.5 billion a year ago, supported by a stronger capital account. The capital account surplus, which includes foreign direct investment and portfolio inflows, was at $6.9 billion in the September quarter compared with $4.3 billion a year ago.
Private transfers largely comprising remittances by Indians employed overseas, amounted to $ 17.4 billion, up 14.7% per cent from $15.2 billion a year ago. Net invisible receipts were higher in H1 of 2017-18 mainly due to increase in net services earnings and private transfer receipts, while net FDI inflows during H1 of 2017-18 moderated by 6.3 per cent over the level during the corresponding period of the previous year.