Home » India’s current account deficit narrows, foreign investment inflows rise in Q1: 2023-24

India’s current account deficit narrows, foreign investment inflows rise in Q1: 2023-24

by WorldFinance
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India's current account deficit narrows, foreign investment inflows rise in Q1: 2023-24

Data released by the Reserve Bank of India (RBI) on Thursday showed a substantial narrowing of India’s Current Account Deficit (CAD) for the first quarter (Q1) of the fiscal year 2023-24. The CAD decreased to $9.2 billion, equivalent to 1.1 per cent of GDP, from $17.9 billion, or 2.1 per cent of GDP, in the same quarter of the previous fiscal year (Q1: 2022-23). However, it was higher than the CAD recorded in the preceding quarter, which stood at $1.3 billion (0.2 per cent of GDP).

The widening of the CAD on a quarter-on-quarter basis was primarily attributed to a higher trade deficit and a decrease in the surplus of net services and private transfer receipts. The trade deficit stood at $56.6 billion. Net services receipts registered a sequential decrease in Q1: 2023-24, mainly due to a decline in exports of computer, travel, and business services.

Private transfer receipts, primarily consisting of remittances by Indians employed overseas, moderated to $27.1 billion in Q1: 2023-24 from $28.6 billion in the previous quarter (Q4: 2022-23). Despite this decrease, they witnessed an increase on a year-on-year basis.

In the financial account, notable changes included a decrease in net foreign direct investment to $5.1 billion from $13.4 billion a year ago and significant inflows of net foreign portfolio investment at $15.7 billion compared to net outflows of $14.6 billion in Q1: 2022-23.

Net external commercial borrowings to India recorded an inflow of $5.6 billion in Q1: 2023-24, contrasting with an outflow of $2.9 billion in the previous year. Non-resident deposits recorded net inflows of $2.2 billion in Q1: 2023-24, a notable increase compared to $0.3 billion in Q1: 2022-23.

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As of the end of June 2023, India’s external debt reached $629.1 billion, marking an increase of $4.7 billion over its level at the end of March 2023.

Despite fluctuations, the narrowing of the current account deficit and increased foreign investment inflows signal positive developments in India’s global economic interactions. Analysts and policymakers will closely monitor these trends, as they have significant implications for India’s overall economic stability and prospects in the coming fiscal year.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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