India’s current account swung to a deficit for the first time in the current fiscal, with the gap coming at USD 1.7 billion or 0.2 per cent of the GDP in the December quarter. In the current fiscal, as the pandemic impacted trade, the current account had been in surplus in the previous two quarters, at USD 15.1 billion and USD 19 billion, respectively, as per the data on balance of payments released by the RBI on Wednesday.
The critical measure of a country’s external strength now stands at a surplus of 1.7 per cent of GDP for the first nine months of the fiscal year as against a deficit of 1.2 per cent in the year-ago period In the December quarter, there was a rise in the merchandise trade deficit to USD 34.5 billion from USD 14.8 billion in the preceding quarter, and an increase in net investment income payments. Net services receipts increased to USD 23.6 billion, both sequentially and on a year-on-year basis, primarily on the back of higher net export earnings from computer services, the RBI said.
Private transfer receipts, which mainly represent remittances by the diaspora, came at USD 20.7 billion for the reporting quarter. This was a marginal decline when compared to October-December 2019 period but a gain of 1.5 per cent when compared with July-September 2020 period. According to the data, net outgo on the primary income account, primarily reflecting payments of investment income, increased to USD 10.1 billion from USD 7.4 billion a year ago.
In the financial account, net foreign direct investment recorded a robust inflow of USD 17 billion in the December quarter as compared with USD 9.7 billion in the year-ago period. With repayments exceeding fresh disbursals, external commercial borrowings to India recorded net outflow of USD 1.7 billion in the December quarter as against an inflow of USD 3.2 billion a year ago, it said.
Net accretions to non-resident deposits increased to USD 3 billion from USD 0.8 billion in Q3FY20, it said. There was an accretion of USD 32.5 billion to the foreign exchange reserves on a Balance of Payment basis as compared with USD 21.6 billion in Q3FY20, the RBI data said.