India's current account deficit narrows to $8.3 billion in July-September

India’s current account deficit stood at $30.9 billion in the second quarter of 2022-23.

India's current account deficit (CAD) narrowed to $8.3 billion in the second quarter of 2023-24, according to data released on December 26 by the Reserve Bank of India (RBI).

As per the data, the CAD in July-September amounted to 1.0 percent of India's GDP.

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"Underlying the lower current account deficit on a year-on-year basis in July-September 2023 was the narrowing of merchandise trade deficit to $61.0 billion from $78.3 billion in July-September 2022," the RBI said.

The CAD in April-June 2023 was $9.2 billion, or 1.1 percent of GDP. In July-September 2022, the deficit stood at a huge $30.9 billion, or 3.8 percent of GDP.

"Services exports grew by 4.2 percent on a year-on-year basis on the back of rising exports of software, business and travel services," the RBI noted.

Trade apart, July-September saw workers' net remittances rise marginally to $14.6 billion from $14.5 billion in the previous quarter. However, on a year-on-year basis, workers' net remittances were down 10 percent.

Also Read: World Bank says India top of remittances list in 2023 with 23% rise to $125 billion

For the first half of 2023-24, the current account deficit more than halved to $17.5 billion - or 1.0 percent of GDP - from $48.8 billion in April-September 2022, or 2.9 percent of GDP. However, the current account deficit is set to widen sharply in October-December, data for which will be released at the end of March 2024.

"Following the expansion in the merchandise trade deficit in October, we expect the CAD for the ongoing quarter to widen appreciably, to around $18-20 billion. Nevertheless, we now foresee the 2023-24 CAD in a range of 1.5-1.6 of GDP, unless commodity prices chart a sharp rebound," said Aditi Nayar, chief economist at ratings agency ICRA.

In October, India's goods imports and the goods trade deficit hit all-time highs of $31.5 billion and $65.0 billion, respectively. However, there was marked moderation in November, with the trade deficit falling to $20.6 billion and imports to $54.5 billion.

For 2022-23 as a whole, India's current account deficit stood at $67.0 billion or 2.0 percent of GDP.