CAD narrows to $300m in Jan-March

The country's current account deficit -the gap between value of exports and imports of goods and services -narrowed to $300 million, or 0.1% of the gross domestic product, in the fourth quarter. The deficit amounted to $7.1 billion (1.3% of GDP) in the previous quarter. In the overall Balance of Payments, the surplus in the fourth quarter fell to $3.3 billion from $4.1 billion in the previous quarter. Investments from foreign institutional investors have been lower and there has been a net outflow in terms of foreign borrowings as older loans matured.
If the present level of deficit is maintained, the RBI will find it easier to manage the $20-billion outflows that will take place in next three months as deposits raised under a special foreign currency scheme in 2013 mature. This will provide support to the rupee.
Foreign direct investments during the quarter fell to $8.8 billion from $9.3 billion in Q4 of 2014-15. Investments by FIIs recorded a net outflow of $1.5 billion in Q4 of 2015-16 as against a net inflow of $12.5 billion in the corresponding period of last year, primarily reflecting net outflow in the debt segment.

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