India’s current account deficit widens to 1.1% of GDP at $9.7 bn in Q1FY25 : RBI

NEW DELHI : The Reserve Bank of India (RBI) released a report titled “India’s Balance of Payments Developments during Q1FY25” on September 30, 2024, detailing India’s current account deficit (CAD) for the first quarter of the fiscal year 2024-25 (Q1FY25).

The Reserve Bank of India (RBI), in a statement, said the CAD widened on a year-on-year (Y-o-Y) basis primarily due to an increase in the merchandise trade deficit, which rose to $65.1 billion in Q1FY25 from $56.7 billion in Q1FY24.

Aditi Nayar, chief economist at ICRA, said, “While the CAD expectedly widened in Q1FY25, it undershot our forecast primarily due to secondary income.”

Looking ahead, the spike in gold imports in August 2024, following the reduction in Customs duty, is likely to bloat this quarter’s CAD considerably to nearly 2 per cent of GDP, Nayar added.

Net services receipts increased Y-o-Y to $39.7 billion in Q1FY25 from $35.1 billion a year ago. Services exports rose on a Y-o-Y basis across major service categories such as computer, business, travel, and transportation.

The RBI reported that private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $29.5 billion in Q1FY25 from $27.1 billion in Q1FY24. The net outgo on the income account, primarily reflecting investment payments, rose to $10.7 billion in Q1FY25 from $10.2 billion in Q1FY24.

Net inflows under foreign portfolio investment plummeted to $900 million in Q1FY25 from $15.7 billion in Q1FY24.

Additionally, net external commercial borrowings to India recorded an inflow of $1.8 billion in Q1FY25, compared to an inflow of $5.6 billion a year ago.

In Q1FY25, regarding the balance of payments position, there was an accretion of $5.2 billion to reserves, compared to an accretion of $24.4 billion in the same period last year, the RBI said.