A surplus BoP

India's external sector balance sheet remained in the comfort zone during the quarter ended March 2017 despite a higher merchandise import bill and almost flat growth in services income as both software services income and remittances by overseas Indians were at the same level as that of the previous year. Strong FDI and portfolio flows helped put the overall balance of payments in a higher surplus.

The current account deficit, excess of the country's imports over exports, expanded marginally to $3.4 billion (0.6% of GDP) in the fourth quarter of FY17, according to preliminary figures released by the Reserve Bank of India. It was higher than $0.3 billion (0.1% of GDP) in Q4 of FY16, but lower than $8.0 billion (1.4% of GDP) in the preceding quarter.

CAD was higher primarily due to higher trade deficit of $29.7 billion. The March numbers, however, fell short of economists' expectations.

Private transfer receipts, mainly representing remittances by Indians employed overseas, at $15.7 billion remained almost at the same level as in the preceding year.

Capital flows comprising foreign direct investment, foreign portfolio investments, overseas borrowings and NRI deposits were strong during the quarter. Capital account surplus more than doubled to $10.3 billion from $3.9 billion in the same period a year ago on account of strong portfolio flows during the quarter. The overall balance of payments, which is the sum of the current and capital account, ended in a higher surplus of $7.3 billion compared with $3.3 billion surplus in the same period a year ago.

For the financial year as a whole, CAD narrowed to 0.7% of GDP in 2016-17 from 1.1% in 2015-16 on the back of a contraction in trade deficit.

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