Current account deficit soars to $3.4 bn as imports jump in Q4

Gap between forex earnings, expenses is narrowed from $8 billion in third quarter of FY17

The current account deficit soared to $3.4 billion, or 0.6 per cent of gross domestic product (GDP), in the fourth quarter of financial year 2017, from $0.3 billion a year ago, the Reserve Bank said on Thursday.

However, on a sequential basis, the gap between forex earnings and expenses, narrowed from $8 billion in the third quarter of FY17.

"The widening of the CAD on a year-on-year basis was primarily on account of a higher trade deficit which stood at $29.7 billion, brought about by a larger increase in merchandise imports relative to exports," RBI said.

Balance of payments for the full financial year stood at $21.6 billion, while for Q4 the same stood at $7.31 billion, according to RBI data.

For the full fiscal 2017, CAD narrowed to 0.7 per cent of GDP from 1.1 per cent in the year ago period on the back of a contraction in trade deficit. In the previous fiscal, trade deficit narrowed to $112.4 billion from $130.1 billion in 2015-16.

While in the fourth quarter, net foreign direct investment moderated to $5 billion. Net portfolio investment recorded substantial inflow of $10.8 billion in both equity and debt segment, as against net outflow of $1.5 billion in the same quarter of FY16.

In FY17, gross FDI inflows stood at $60.2 billion, higher than $55.6 billion in 2015-16, while net FDI inflows in 2016-17 was at $35.6 billion as against $36 billion in 2015-16.

Portfolio investment recorded a net inflow of $7.6 billion in 2016-17 as against an outflow of $4.5 billion a year ago.

In FY17, there was an accretion of $21.6 billion to the foreign exchange reserves as compared with $17.9 billion in 2015-16.