December 27th 2024.
The Reserve Bank of India has released new data on India's current account deficit, showing a slight moderation to $11.2 billion or 1.2% of GDP during the July-September quarter of 2024-25. This is a small improvement compared to the previous year's second quarter, when the CAD was at $11.3 billion or 1.3% of GDP. According to the RBI, this decrease can be attributed to various factors, including an increase in services exports and private transfer receipts, which represent remittances from Indians working abroad.
From April to September 2024, the current account deficit was at $21.4 billion or 1.2% of GDP, slightly higher than the previous year's figure of $20.2 billion. The data also showed an increase in merchandise trade deficit, which rose to $75.3 billion in the second quarter of 2024-25 from $64.5 billion in the same period of 2023-24. However, this was offset by an increase in net services receipts, which reached $44.5 billion in Q2 2024-25, compared to $39.9 billion in the previous year.
The RBI also highlighted the performance of major service categories, with computer services, business services, travel services, and transportation services all showing year-on-year growth. In terms of financial account, the data showed a net outflow of $2.2 billion in foreign direct investment in the second quarter of 2024-25, compared to a net outflow of $0.8 billion in the same period of 2023-24. However, net inflows under foreign portfolio investment increased significantly, reaching $19.9 billion in Q2 2024-25 from $4.9 billion a year ago.
Looking at the bigger picture, the data also revealed an overall increase in net invisibles receipts, which reached $119.0 billion in the first half of 2024-25, compared to $101 billion in the same period of the previous year. This was mainly driven by a rise in net services receipts. Additionally, net FDI inflows and FPI recorded net inflows in the first half of 2024-25, at $4.4 billion and $20.8 billion respectively.
The RBI also reported a significant accretion of $23.8 billion to the foreign exchange reserves in the first half of 2024-25, indicating a strong performance in this area. Overall, while there are some areas of concern such as the increase in merchandise trade deficit, the data shows a positive trend in India's external payment scenario. With an increase in services exports and inflows from foreign investments, the country's current account deficit is on track to be better than the previous year.
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