India's current account deficit increases 7 times quarter-to-quarter: Here's why
India's current account deficit (CAD) has seen a whopping increase, hitting $9.2 billion in the first quarter of 2023-24. That's over seven times higher than the figure from the previous quarter. As per Reserve Bank of India (RBI) data, the CAD for April-June made up 1.1% of GDP. The main reason for this growing CAD is a larger trade deficit, a smaller surplus in net services, as well as a drop in private transfer receipts.
Trade deficit and services surplus
India's services trade surplus went up to $35.1 billion in April-June 2023 from $31.1 billion a year ago. However, it was lower compared to the $39.1 billion recorded in January-March 2023. The merchandise trade deficit got better, reaching $56.6 billion from $63.1 billion, but it was still higher than the $52.6 billion in January-March 2023. According to the RBI, net services receipts fell sequentially due to a decrease in exports of travel, computer, and business services.
CAD expected to widen in the July-September quarter
On the whole, India's trade deficit in April-June this year stood at $21.5 billion. This is down from the $32 billion in April-June in 2022 but higher than $13.5 billion in the first quarter of 2023. Investment Information and Credit Rating Agency (ICRA) predicts a growing CAD of $19-21 billion or 2.3% of GDP in July-September 2023. It projects the CAD to widen to $73-75 billion (2.1% of GDP) in 2023-24 from $67 billion (2% of GDP) in 2022-23.
