Current Account Deficit Widens

India’s current account deficit widened to 2.9% of the GDP in the second quarter of the fiscal, compared with 1.1% in the year-ago period, mainly due to a large trade deficit.

The CAD, or the difference between outflow and inflow of foreign exchange in the country’s current account, was $19.1 billion during the quarter ended September 30, 2018. It increased from $6.9 billion or 1.1% of GDP in the second quarter of 2017-18. The CAD stood at $15.9 billion (2.4% of GDP) in the April-June quarter.

“India’s current account deficit (CAD) at $19.1 billion (2.9% of GDP) in Q2 of 2018-19 increased from $6.9 billion (1.1% of GDP) in Q2 of 2017-18 and $15.9 billion (2.4% of GDP) in the preceding quarter,” the RBI said.

The CAD has increased to 2.7% of GDP in first half of 2018-19 from 1.8% in the corresponding period of 2017-18 on the back of widening of the trade deficit.

As per the central bank, the widening of the CAD on a year-on-year basis was primarily on account of a higher trade deficit at $50 billion as compared to $32.5 billion a year ago.

RBI’s preliminary data on India’s balance of payments for July-September 2018-19 further revealed that net services receipts increased by 10.2% on a YoY basis, mainly on the back of a rise in net earnings from software and financial services.

Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $20.9 billion during the quarter, increasing by 19.8% from their level a year ago.

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