Raising concerns over India’s fiscal position, the Reserve Bank of India (RBI) has stated that the country's current account deficit (CAD) widened to 2.5% of Gross Domestic Product (GDP) in Q3FY19 from 2.1% a year ago, primarily due to a higher trade deficit. In absolute terms, India’s CAD widened to $16.9 billion in the October-December 2018 quarter against $13.7 billion in the year ago quarter.
However, it was lower vis-a-vis preceding quarter’s $19.1 billion (2.9% of GDP). The widening of the CAD on a year-on-year basis was primarily on account of a higher trade deficit at $49.5 billion as compared with $44.0 billion a year ago. The CAD increased to 2.6% of GDP during the April-December 2018 period, from 1.8% in April-December 2017 on the back of widening of the trade deficit. CAD arises when a country’s total imports of goods, services and transfers is greater than exports.
Besides, the RBI stated that portfolio investment recorded net outflow of $2.1 billion in Q3 of FY19- as compared with an inflow of $5.3 billion in Q3 last year on account of net sales in the equity market. Net inflow on account of external commercial borrowings increased to $2 billion, from $0.3 billion a year ago. Non-Resident Indian (NRI) deposits nudged up only $139 million against $3.32 billion.