India reports current account surplus in Q4

A lower goods trade deficit, higher services exports and a surge in remittances from abroad in the March quarter pushed India’s current account deficit into surplus territory after a gap of 10 quarters, Reserve Bank of India (RBI) data showed.

India’s current account balance, which reflects net global transactions, recorded a surplus of $5.7 billion, or 0.6% of gross domestic product (GDP), in the March quarter against a deficit of $8.7 billion, or 1% of GDP, in the December quarter and $1.3 billion, or 0.25% of GDP, a year ago.

The merchandise trade deficit at $50.9 billion during the March quarter was lower than $52.6 billion a year ago.

Services exports rose 4.1% in the March quarter from a year ago on rising exports of software, travel and business services. Net services receipt during the quarter was recorded at $42.7 billion against $39.1 billion a year ago.

Private transfer receipts, comprising primarily of remittances by Indians employed overseas during the quarter, came in at $32 billion, an 11.9% jump from a year ago.

In the financial account, net foreign direct investment flows during the quarter were at $2 billion against $6.4 billion a year ago.

Foreign portfolio investments recorded a net inflow of $11.4 billion against a net outflow of $1.7 billion in the year-ago quarter.

Net inflows from external commercial borrowings amounted to $2.6 billion when compared with $1.7 billion a year ago.

Non-resident deposits during the quarter recorded a higher net inflow of $5.4 billion than $3.6 billion in the March quarter of the previous fiscal year.

Preliminary RBI data also showed a sixfold jump in accretion of foreign exchange reserves (excluding valuation effects) to the tune of $30.8 billion during the quarter when compared with an accretion of $5.6 billion a year ago.

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For the full fiscal year, though, current account deficit more-than-halved to a seven-year low of $23.2 billion, or 0.7% of GDP, from $67 billion, or 2% of GDP, during the previous year on a lower merchandise trade deficit.

During the past fiscal year, portfolio investment recorded a net inflow of $44.1 billion against an outflow of $5.2 billion a year ago.

Net foreign direct investment inflow during the past fiscal declined to $9.8 billion when compared with $28.0 billion in fiscal 2023.

The full fiscal year saw an accretion of $63.7 billion to the foreign exchange reserves, on a balance of payments basis, data showed.

The merchandise trade deficit in the current fiscal year is expected to widen to $272-275 billion from $242.1 billion in the past fiscal on the stronger growth in domestic demand and higher commodity prices, ICRA forecasted.

Overall, the current account deficit will rise sharply to $40-44 billion in the current fiscal from $23.2 billion, ICRA projected, adding that as a proportion of GDP, it may still “remain manageable at 1.0-1.2%.

“This is likely to be comfortably financed, particularly given the expectations of large FPI-debt inflows on account of the bond index inclusion starting end-June 2024,” the ICRA report said.