Current account deficit narrows marginally to 1.2% of GDP in Q2FY25

RBI released data on India's current account deficit for Q2 FY25 on December 27

India’s current account deficit (CAD) moderated marginally to 1.2 percent of GDP at $11.2 billion in the second quarter of 2024-25 from 1.3 percent or $11.3 billion in the same period a year ago. The deficit stood at $9.7 billion or 1.1% of GDP in the preceding quarter.

This, despite merchandise trade deficit increasing to $75.3 billion in Q2FY25 from $64.5 billion in the second quarter of the previous financial year, showed data released by the Reserve Bank of India (RBI) on December 27.

The moderation in CAD was largely assisted by an increase in net services receipts at $44.5 billion in the July-September quarter from $39.9 billion a year ago.

Services exports have risen, on an annual basis, across major categories such as computer services, business services, travel services and transportation services, RBI said in the release.

In the financial account, net foreign direct investment recorded a higher outflow of $2.2 billion in Q2 of 2024-25 as compared with an outflow of $0.8 billion in the corresponding period of 2023-24.

However, net inflows under foreign portfolio investment increased to $19.9 billion in the second quarter of 2024-25 from $4.9 billion on-year, while inflows under external commercial borrowings (ECBs) to India amounted to $5.0 billion in July-September, a reversal from the outflows of $1.9 billion in the corresponding period a year ago.

Non-resident deposits (NRI deposits) too recorded higher net inflows of $6.2 billion, versus $3.2 billion a year ago.

During the first half of the current fiscal (April-September), the current account deficit remained flat at 1.2 percent or $21.4 billion on a year-on-year basis.

Net FDI inflows during this period stood at $4.4 billion, higher than $3.9 billion in the first half of the last financial year.

India's CAD for the second quarter of FY25, however, is wider than the figures for April-June of 2024-25, which came in at 1.1 percent of the GDP.