Q3 CAD grows to 1.4%, but halves in April-December

The current account deficit (CAD) increased to USD 7.9 billion, or 1.4 per cent of GDP, in the December quarter due to a fall in services exports, the Reserve Bank said today.

The CAD -- the difference between the value of imports of goods, services and investment incomes, and that of exports -- was USD 3.4 billion, or 0.6 per cent, in the September quarter and 1.4 per cent in the year-ago period.

During April to December, however, the deficit halved to 0.7 per cent, from 1.4 per cent a year ago. This was primarily because of fall in earnings from software, financial services and charges for intellectual property rights.
 

"Despite a slightly lower trade deficit on a year-on-year basis, CAD widened primarily on account of a decline in net invisibles receipts," the central bank said.

The net invisibles or services receipts moderated to USD 17.6 billion for the December quarter, from USD 18 billion a year earlier, it said.

There was a 3.8 per cent decline in private transfer receipts, which mainly represent remittances by Indians employed overseas, to USD 15.2 billion.

The net foreign direct investment of USD 9.8 billion during the reporting quarter was marginally lower than last year.

There was a net outflow of portfolio investment to the tune of USD 11.3 billion during the period in both equity and debt segments, as against a net inflow of USD 0.6 billion in the year-ago period.

On a cumulative basis, net FDI rose 12.3 per cent to USD 30.6 billion for April-December 2016.

Due to the FCNR(B) deposits redemptions, non-resident (NRI) deposits declined by USD 18.5 billion as against an inflow of USD 1.6 billion in the year-ago period.

The foreign exchange reserves declined by USD 1.2 billion on a balance of payments (BoP) basis as against an increase of USD 4.1 billion last year.

There was an accretion of USD 14.2 billion to the forex reserves for the nine months in question.

The CAD had increased to an all-time high of 4.8 per cent in 2013-14.