India's FY24 CAD narrows to 0.7% of GDP from 2% in FY23, records surplus of 0.6% in Q4: RBI

India’s current account registered a surplus in the final quarter of the previous fiscal boosted by higher services. Its current account deficit (CAD) decreased in FY24 due to lower merchandise trade deficit, the Reserve Bank of India (RBI) said on June 24. 

The country’s Current Account Deficit (CAD) decreased to 0.7 percent of GDP, or $23.2 billion in FY24, down from 2 percent of GDP, or $67 billion, in FY23. 

“The sequential decline in CAD in Q4:2022-23 was mainly on account of a moderation in the trade deficit to $52.6 billion in Q4:2022-23 from $71.3 billion in Q3:2022-23, coupled with robust services exports,” the bank said in a release. 

Foreign portfolio investment experienced a net inflow of $44.1 billion in FY24 compared to a net outflow of $5.2 billion in FY23. Meanwhile, net FDI inflow dropped to $9.8 billion in FY24 compared to $28 billion in FY23. 

FPIs saw a net inflow of $11.4 billion in Q4FY24 after registering a net outflow of $1.7 billion in the same period a year ago. Net FDI inflow stood at $2 billion in Q4 against a net outflow of $1.7 billion seen in Q4FY23. 

India is likely to witness an infusion of $20-25 billion of capital owing to its inclusion in the global bond index. The country will be included in the GBI-EM Index suit on June 28. 

The country’s foreign exchange reserves increased by $63.7 billion in FY24 on a Balance of Payment basis. 

While the merchandise trade deficit narrowed compared with the previous year, net services trade was up nearly $20 billion during this period. 

Merchandise trade deficit in Q4 stood at $50.9 billion, lower than $52.6 billion seen in Q4FY23. 

“Services exports grew by 4.1 percent on a y-o-y basis in Q4:2023-24 on the back of rising exports of software, travel and business services. Net services receipt at $ 42.7 billion was higher than its level a year ago ($ 39.1 billion), which contributed to the surplus in the current account balance during Q4:2023-24,” RBI noted. 

Remittances were up 11.9 percent in the last quarter from $28.6 billion in Q4FY23, whereas portfolio inflows turned positive to $11.4 billion in the last quarter of FY24 compared with an outgo of $1.7 billion a year before.