India's current account deficit, which is the excess of imports of goods and services over exports, narrowed to $3.4 billion or 0.6% of the gross domestic product from a year earlier as merchandise imports contracted during the September quarter.
India's current account deficit in its external sector balance sheet at $3.4 billion was lower than the $8.5 billion in the same period a year ago. The contraction in CAD has been due to a sharp fall in imports relative to exports during the quarter as oil and commodities prices, which account for a sizeable portion of India's imports, were still lower, though good times may not last with surging oil prices.
Since crude oil prices have started firming up, CAD was higher sequentially from $0.3 billion (0.1% of GDP) in the preceding quarter.
A structural shift in the current account number in the balance of payments is evident as traditional contributors to the current account -software exports and remittances by overseas Indians -slipped in the latest quarter.
Remittances by Indians employed overseas or private transfers, amounted to $15.2 billion, down 10.7% from level a year ago at $16.4 billion. Software services exports were lower by 3% at $17.7 billion compared to $18.2 billion in July-September 2015 quarter. The capital account, comprising foreign investment (foreign direct investment and foreign portfolio investment), NRI deposits, overseas commercial borrowings and external assistance, ended in a higher surplus of $12.7 billion in the September quarter, up from $7.2 billion a year ago. FDI and FII investments, which was higher this year at $17 billion, may end lower as global investors pull out funds.
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