India's Current Account Deficit Narrows as Trade Improves

India’s current account deficit fell significantly in the January-to-March quarter, according to the country’s central bank.

The Reserve Bank of India said on Tuesday that the improvement stemmed from a moderation in the trade gap and an increase in services exports.

The current account deficit (CAD) stood at $1.3 billion or 0.2% of GDP in the fourth quarter of fiscal year 2022/23, compared with a revised deficit of $16.8 billion or 2% of GDP in the preceding October-December quarter.

ALSO SEE: How Samsung Exec ‘Stole $200m Chip Secrets’ for Foxconn China Fab

The deficit had stood at $13.4 billion in the same quarter a year ago, the central bank’s statement said.

“The sequential decline in CAD in Q4:2022-23 was mainly on account of a moderation in the trade deficit to $52.6 billion in Q4:2022-23 from $71.3 billion in Q3:2022-23, coupled with robust services exports,” the RBI said in the release.

A Reuters survey of 22 economists showed the current account balance likely recorded a surplus of $3.3 billion, or 0.4% of gross domestic product (GDP) in the March quarter.

Forecasts ranged widely, from a deficit of $5.0 billion to a surplus of $7.8 billion.

Current account seen narrower in 2023/24

Barclay’s said India’s current account dynamics are expected to improve on average in the current year.

“We forecast the current account deficit to print lower in FY23-24: both export and import values are expected to soften owing to weak external demand and lower international commodity prices – leading to a narrower goods trade deficit compared to the previous fiscal year,” Barclay’s Jaydeep Raval said in a research note on Tuesday.

“We think a larger boost to the current account balance will come from a robust services trade surplus. We thus expect the current account deficit to print around $40bn (1.1% of GDP) in FY2023-24, and increase only modestly to 1.2% of GDP in FY2024-25.”