Mumbai, Dec 7 (IANS) Higher crude oil prices and gold imports widened India’s current account deficit (CAD) to $19.1 billion during the second quarter of 2018-19 from $15.9 billion in the preceding quarter and $6.9 billion in the corresponding period of 2017-18, the Reserve Bank of India (RBI) data showed on Friday.
“India’s CAD at $19.1 billion (2.9 per cent of GDP) in Q2 of 2018-19 increased from $6.9 billion (1.1 per cent of GDP) in Q2 of 2017-18 and $15.9 billion (2.4 per cent of GDP) in the preceding quarter,” the RBI said in its statement on developments in India’s Q2 balance of payments (BoP).
“The widening of the CAD on a year-on-year (y-o-y) basis was primarily on account of a higher trade deficit at $50 billion as compared with $32.5 billion a year ago.”
According to the RBI, net services receipts increased by 10.2 per cent on a y-o-y basis mainly on the back of a rise in net earnings from software and financial services.
“Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $20.9 billion, increasing by 19.8 per cent from their level a year ago,” the RBI said.
“In the financial account, net foreign direct investment at $7.9 billion in Q2 of 2018-19 moderated from $12.4 billion in Q2 of 2017-18.”
In addition, the portfolio investment recorded net outflow of $1.6 billion in Q2 of 2018-19 — as compared with an inflow of $2.1 billion in Q2 last year — on account of net sales in both the debt and equity markets.
“Net receipts on account of non-resident deposits increased to $3.3 billion in Q2 of 2018-19 from $0.7 billion a year ago,” the central bank said.
The RBI added that in Q2 2018-19, there was an depletion of $1.9 billion in the foreign exchange reserves (on BoP basis) as against an accretion of US$ 9.5 billion in Q2 of 2017-18.
“The current account deficit for Q2 FY2019 came in at the lower end of our forecast range of $19-21 billion, benefiting from substantial remittances. The widening in the current account deficit in Q2 FY2019, from the modest level in Q2 FY2018, was led by higher crude oil prices and gold imports,” said ICRA Principal Economist Aditi Nayar.
“While the subsequent correction in crude oil prices has eased concerns regarding the size of the import bill in H2 FY19, it may result in a moderation in remittances. On balance, ICRA forecasts India’s current account deficit at $68-73 billion or 2.6 per cent of GDP for FY2019.”