Current A/c in Surplus After Over a Decade

India’s external position improved last fiscal with the current account turning a surplus in the fourth quarter for the first time in over a decade as a surge in private transfers and software services income helped. The full year current account deficit was the lowest in three years.But a possible slowdown in inward remittances and software services income could pare, moderate or marginally reverse gains this fiscal.

The current account, the aggregate of country’s exports and imports of goods and services, ended in a marginal surplus of $0.6 billion or 0.1% of the gross domestic product in the March quarter last fiscal, compared to a deficit of $4.6 billion or 0.7% of GDP a year ago, data from the RBI shows. The last time current account was in surplus was in the fourth quarter of FY2007. That quarter saw a surplus of $4.2 billion.

A current account surplus during the time of an economic crisis augurs well for the country as it eliminates the risk of a collapse in currency value. While economy is expected to shrink about 4-5% this fiscal, steady portfolio and foreign direct investment flows have also helped stabilise the currency though there was a brief outflow due to Covid-19.

Foreign exchange reserves are at historic highs above half a trillion-mark.

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