India's current account deficit widens to $9.2 bn in April-June quarter: RBI data

India's current account deficit has gone up to $9.2 billion in the first quarter of FY24 on a sequential basis, but narrowed when compared year-on year. The CAD is about 1.1 per cent of the GDP, Reserve Bank of India data showed on Thursday. The CAD in January-March was $1.3 billion, or 0.2 per cent of GDP. In April-June 2022, it stood at $17.9 billion, or 2.1 per cent of GDP.

"The widening of CAD on a quarter-on-quarter basis was primarily on account of a higher trade deficit coupled with a lower surplus in net services and decline in private transfer receipts," the RBI said. 

The external debt to GDP ratio declined to 18.6 per cent at end-June 2023 from 18.8 per cent at end-March 2023, RBI data showed.

While India's services trade surplus rose to $35.1 billion in April-June 2023 from $31.1 billion a year ago, it was lower than the $39.1 billion recorded in January-March 2023.

The merchandise trade deficit improved to $56.6 billion from $63.1 billion, it was higher than $52.6 billion in January-March 2023.

The CAD had narrowed in the January-March quarter of FY23, the first time in the last seven quarters.

"Net services receipts decreased sequentially, primarily due to a decline in exports of computer, travel and business services," the RBI noted.

Overall, India's trade deficit in April-June 2023 was $21.5 billion, down from $32.0 billion in April-June 2022 but higher than $13.5 billion in the first quarter of 2023.

At the end of June 2023, long-term debt (with original maturity of above one year) was placed at $505.5 billion, recording an increase of $9.6 billion over its level at the end of March 2023.

The share of short-term debt (with original maturity of up to one year) in total external debt declined to 19.6 per cent at end-June 2023 from 20.6 per cent at  end-March 2023. Similarly, the ratio of short-term debt (original maturity) to foreign  exchange reserves declined to 20.8 per cent at end-June 2023 (22.2 per cent at end-March 2023).

"India’s current account deficit (CAD) widened to $9.2 billion (-1.1% of GDP) in Q1 FY2024 from $1.3 billion in Q4 FY 2023 (-0.2% of GDP), but trailed our forecast led by a healthier than anticipated merchandise trade balance, even as the services trade surplus and balance of secondary income were smaller than anticipated.  With the average merchandise trade deficit trending higher in Jul-Aug 2023 relative to Q1 FY2024 levels, and the recent rise in crude oil prices, ICRA estimates the CAD to widen sequentially to $19-21 billion (-2.3% of GDP) in Q2 FY2024. Overall, ICRA projects the CAD to widen to $73-75 billion (-2.1% of GDP) in FY2024 from $67.0 billion (-2.0% of GDP) in FY2023, building in an average crude oil price of $90/bbl in H2 FY2024," said Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA Ltd. 

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