India’s current account (CAD) deficit galloped to $23 billion, or 2.7% of GDP, in the quarter ended December 2021 from $9.9 billion (1.3% of GDP) in the previous quarter, according to the Reserve Bank of India (RBI) data released. on Thursday. CAD had hit $2.2 billion (0.3% of GDP) a year earlier, data showed.
“The expansion of CAD in Q3:2021-22 was mainly due to a higher trade deficit,” RBI said. Services net revenue increased both sequentially and year-on-year (yoy) on the robust development of computer and business services net exports.
ICRA Chief Economic Aditi Nayar said: “We expect the current account deficit to narrow somewhat to around $17 billion to $21 billion in the fourth quarter of fiscal 2022 with the third wave [of COVID-19 infections] temporary restriction of certain imports”.
She pointed out that if the ongoing geopolitical tensions between Ukraine and Russia push the average price of “Indian crude oil basket up to $105/barrel in FY23, CAD is expected to rise to $90-95 billion.”
Private remittance receipts, which represent mostly remittances from Indians working abroad, totaled $23.4 billion, up 13.1% from a year ago.
Net outflows from the primary income account, which mainly reflect net payments of investment income from abroad, increased both sequentially and year-on-year.
On the financial account, the net inflow of foreign direct investment fell from USD 17.4 billion to USD 5.1 billion.
Portfolio investment saw a net outflow of $5.8 billion versus an inflow of $21.2 billion
External net commercial credit to India recorded an outflow of US$0.2 billion versus US$1.6 billion.
Deposits from non-residents recorded a net inflow of US$1.3 billion, compared to US$3 billion in Q3 2020-21, according to RBI data.
On a balance of payments basis, there was a $0.5 billion addition to foreign exchange reserves, compared to $32.5 billion.