India’s Current Account Deficit (CAD) for the quarter ended March 2022 was sequentially narrowed to 1.5 per cent of GDP, as remittances from overseas Indians as well as software exports surged and the outflow from dividend and interest payouts fell, the data RBI shows.
According to preliminary estimates released by the Reserve Bank of India in June 2022, India’s CAD declined to $13.4 billion (1.5 per cent of GDP) in the fourth quarter of 2021-22 from $22.2 billion (2.6 per cent of GDP) in the third quarter of 2021-22.
“The sequential decline in CAD in Q4’2021-22 (January-March) was mainly on account of a moderation in the trade deficit and lower net outgo of primary income,” the central bank said.
The key component of ‘Invisibles’ reflecting services and investment income flows outperformed sequentially as well as on a year-on-year basis. RBI said in a release that the net services receipts increased sequentially and on a year-on-year basis, owing to the increase in net income from computer and business services.
Merchandise trade deficit fell to $54.5 billion
India’s merchandise trade deficit fell to $54.5 billion in the first quarter of 2022 from $59.8 billion in the previous quarter, helping bring down the CAD. On the services front, the trade surplus marginally increased to $28.3 billion from $27.8 billion in October-December 2021.
Remittances by Indians increased by $23.7 billion
Private transfer receipts, mainly reflecting remittances by Indians working abroad, rose 13.4 per cent to $23.7 billion from a year-ago level. Net outgo from the primary income account, largely reflecting net income payments on foreign investments, declined sequentially as well as on a year-on-year basis.
Foreign Exchange Reserve increased by $47.5 billion in 2021-22
On a balance of payments basis, foreign exchange reserves rose by $47.5 billion during 2021-22, as against $87.3 billion during 2020-21, according to the data of Variation in Foreign Exchange Reserves in India during 2021-22 released by the RBI.
Net invisible receipts were higher due to increase in net exports
For the entire fiscal year, the current account balance posted a deficit of 1.2 per cent of GDP in 2021-22, against a surplus of 0.9 per cent in 2020-21, as the trade deficit widened to $189.5 billion from $102.2 billion a year ago. Net invisible receipts were higher in 2021-22 due to an increase in net exports of services and net private transfer receipts, even though net income outgo was higher than a year ago.