India’s current account balance during the fourth quarter that ended in March 2024 (Q4FY24) showed a surplus of $5.7 billion, or 0.6% of GDP.
The Reserve Bank of India (RBI) recently revealed data that indicated this had occurred after a lapse of ten quarters due to a spike in services exports.
The fourth quarter of the preceding fiscal year saw a $1.3 billion (0.2 percent of GDP) current account deficit (CAD).
Quarterly GDP (Q3FY24) was $8.7 billion (CAD) at the end of December 2023.
The CAD decreased from $67 billion (2 percent of GDP) in FY23 to $23.2 billion (0.7 percent of GDP) in FY24. This followed a reduction in the merchandise trade imbalance.
India’s CAD more than halved to a seven-year low of $23.2 billion in FY24 from $67 billion in FY23, according to Aditi Nayar, chief economist at ICRA. It was made possible by a significant increase in the services trade surplus and a reduction in the merchandise trade deficit.
“The narrowing of the merchandise trade deficit print to a 10-quarter low of $50.9 billion in Q4 FY24 from $69.9 billion in Q3 FY24 was the primary driver of the turnaround to a surplus in Q4 FY24 from a deficit in the year-ago period,” Nayar stated.
Providing further details on the quarterly patterns, the RBI stated that Q4 FY24 net services receipts of $42.7 billion were higher than Q4 FY24 net services receipts of $39.1 billion. This helped to explain why the current account balance was positive in Q4.
The primary income account’s net outgo, which primarily represents payments of investment income, climbed to $14.8 billion from $12.6 billion in the previous year. According to RBI, private transfer receipts, which primarily comprise remittances from Indians working abroad, reached $32 billion, up 11.9% over the same amount the previous year.
Regarding the foreign exchange kitty’s situation, the RBI said that, disregarding the value effect, the foreign exchange reserves had grown sixfold to $30.8 billion in Q4 of FY24. In Q4FY23, it was $5.6 billion.
According to RBI, the net invisible receipt for FY24 increased from the previous year mainly due to transfers and services.
Regarding foreign exchange, there was a $63.7 billion increase in FY24 compared to a $9.1 billion decline in FY23.
Nayar stated that although CAD is predicted to slightly increase in FY25, the deficit would still be quite manageable at 1.1–1.2 percent of GDP. This is because rising commodity costs and domestic demand have caused the merchandise trade deficit to increase this fiscal year.
“The CAD in FY25 would be comfortably financed, especially considering the anticipated large inflows of FPI-debt due to the bond index inclusion beginning at the end of June 2024,” the spokesperson stated.
According to Bank of Baroda chief economist Madan Sabnavis, the CAD in FY25 should be controlled around 1.1–1.5 percent of GDP. He continued, “The consistent inflows of capital should guarantee that the balance of payments, which represents the fundamentals, stays comfortable.”