From deficit to surplus, India's current account registers a surplus of $5.7bn

Business Tuesday 25/June/2024 08:53 AM
From deficit to surplus, India's current account registers a surplus of $5.7bn

New Delhi: India's current account balance registered a surplus of USD 5.7 billion, equivalent to 0.6 per cent of GDP, in the fourth quarter of the financial year 2023-24, the Reserve Bank of India said on Monday.

The data shows a significant turnaround from the previous quarter, where the country recorded a deficit of USD 8.7 billion, or 1.0 per cent of GDP. Furthermore, it shows an improvement compared to the same period a year earlier, Q4 of FY 2022-23, when the current account surplus was USD 1.3 billion, amounting to 0.2 per cent of GDP.

A key factor contributing to this surplus was the reduction in the merchandise trade deficit, which stood at USD 50.9 billion in Q4 of FY 2023-24, down from USD 52.6 billion in the corresponding quarter of the previous year, the data released by the RBI said.

According to the RBI, this reduction was supported by a notable increase in services exports, which grew by 4.1 per cent year-on-year in the fourth quarter. This growth was driven primarily by rising exports in software, travel, and business services sectors.

As a result, net services receipts rose to USD 42.7 billion, up from USD 39.1 billion a year earlier, significantly contributing to the current account surplus.

RBI also said that the overall current account balance remained positive due to the other contributing factors. The private transfer receipts, predominantly remittances by Indians working overseas, also saw a substantial increase. These receipts amounted to USD 32.0 billion in Q4 FY 2023-24, marking an 11.9 per cent increase over the previous year's level.

In the financial account, net foreign direct investment (FDI) flows were recorded at USD 2.0 billion in the fourth quarter of 2023-24, which was a decline compared to USD 6.4 billion in the same period the previous year. However, foreign portfolio investment showed a significant recovery, with a net inflow of USD 11.4 billion in Q4 FY 2023-24, compared to a net outflow of USD 1.7 billion in Q4 FY 2022-23.

Additionally, net inflows under external commercial borrowings to India increased to USD 2.6 billion in the fourth quarter of 2023-24, up from USD 1.7 billion a year earlier. Non-resident deposits also showed a marked improvement, with a higher net inflow of USD 5.4 billion compared to USD 3.6 billion in Q4 FY 2022-23.

The RBI pointed out that these factors collectively contributed to the current account surplus in Q4 FY 2023-24, highlighting a period of financial stability and positive economic indicators for India. The data highlighted the strong performance of India's service exports and the significant role of remittances in supporting the country's external balance.