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India’s CAD widens to 1.1% of GDP

Context

India’s current account deficit (CAD) has slightly increased to 1.1% of GDP, amounting to $9.8 billion in the first quarter (Q1) of FY25, up from $8.9 billion (1% of GDP) in the same period last year. This rise is primarily due to an increase in the merchandise trade deficit.

Key-highlights:

CAD occurs when a country's imports of goods and services exceed its exports. In Q1 FY25, India recorded a merchandise trade deficit of USD 65.1 billion, compared to USD 56.7 billion in the same quarter last year.
The country had a surplus of USD 4.6 billion (0.5% of GDP) in the previous quarter (Q4 FY24).
Factors Influencing the CAD
- Net Service Receipts: Increased to $39.7 billion in Q1 FY25 from USD 35.1 billion a year ago, boosted by growth in service exports like computer, business, travel, and transportation services.
- Private Transfers: Remittances from Indians working abroad rose to USD 29.5 billion from USD 27.1 billion in the same quarter last year.
- Primary Income Outgo: Payments for investment income went up to USD 10.7 billion from $10.2 billion.
Foreign Investments
- Foreign Direct Investment (FDI): Net inflows increased to USD 6.3 billion from USD 4.7 billion a year ago.
- Foreign Portfolio Investment (FPI): Moderated significantly to USD 3.9 billion from $15.7 billion.
Other Financial Indicators
- External Commercial Borrowings (ECBs): Net inflows fell to USD 1.8 billion from USD 5.6 billion a year ago.
- Non-Resident Indian (NRI) Deposits: Increased to USD 4 billion, up from USD 2.2 billion.
Foreign Exchange Reserves: India’s foreign exchange reserves grew by USD 5.2 billion in Q1 FY25, compared to a larger increase of USD 24.4 billion in the same quarter last year.

Fact Box: What is Current Account Deficit (CAD)?

Current Account Deficit (CAD) is the shortfall between the money received by selling products to other countries and the money spent to buy goods and services from other nations.
- Current account maintains a record of the country's transactions with other nations.
If the value of goods and services (import) exceeds the value of those export, the country is said to be in a deficit, and the difference in the two values is CAD.
The current account includes net income, including interest and dividends, and transfers, like foreign aid.
India’s current account position is largely on the deficit side because of the country's dependence on oil imports.

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GS Analyst: Daily Current Affairs

1st October 2024 (12 Topics)

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India’s CAD widens to 1.1% of GDP

Key-highlights:

Fact Box: What is Current Account Deficit (CAD)?

Still Have Questions?

GS Analyst: Daily Current Affairs

India’s CAD widens to 1.1% of GDP

Key-highlights:

Fact Box: What is Current Account Deficit (CAD)?

Still Have Questions?

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