India reported a current account surplus of USD 5.7 billion, or 0.6 percent of its GDP, for the March quarter, as announced by the Reserve Bank of India on Monday. This marks the first surplus in ten quarters, signaling a notable improvement in the country's external financial health.
In contrast, the same quarter last year saw a current account deficit of USD 1.3 billion, or 0.2 percent of GDP. The preceding quarter, which ended in December 2023, recorded an even larger deficit of USD 8.7 billion, or 1 percent of GDP.
For the fiscal year 2024, the current account deficit significantly decreased to USD 23.2 billion, or 0.7 percent of GDP, compared to USD 67 billion, or 2 percent of GDP, in FY23. This information was detailed in the RBI's release on the Developments in India’s Balance of Payments.
Aditi Nayar, the chief economist at Icra, forecasted a slight increase in the current account deficit for FY25 to 1-1.2 percent of GDP but emphasized that it would remain manageable. She attributed this anticipated rise to a widening merchandise trade gap driven by domestic demand and higher commodity prices. Nayar also highlighted that increased foreign portfolio investments (FPI) in the country’s bond market would ease financing challenges.
In the January-March 2024 period, the merchandise trade deficit was USD 50.9 billion, down from USD 52.6 billion in the same period the previous year.
Net services receipts rose to USD 42.7 billion from USD 39.1 billion, driven by a 4.1 percent growth in the services sector. This growth was a crucial factor in turning the current account into surplus.
Outflows on the primary income account, mainly representing investment income payments, increased to USD 14.8 billion from USD 12.6 billion a year earlier.
Private transfer receipts, largely remittances from Indians working abroad, grew by 11.9 percent to USD 32 billion in the March quarter.
Non-resident deposits surged to USD 5.4 billion in January-March, compared to USD 3.6 billion in the same period last year.
Net foreign direct investment (FDI) flows were USD 2 billion in Q4 FY24, down from USD 6.4 billion in the same quarter the previous year.
Foreign portfolio investment saw a net inflow of USD 11.4 billion during the quarter, a significant turnaround from a net outflow of USD 1.7 billion a year ago.
Net inflows under external commercial borrowings were USD 2.6 billion, up from USD 1.7 billion the previous year.
For FY24, portfolio investments recorded a net inflow of USD 44.1 billion, compared to an outflow of USD 5.2 billion the previous year. In contrast, net FDI fell to USD 9.8 billion from USD 28 billion in FY23.
The substantial FPI of USD 44.1 billion in FY24, compared to outflows of USD 4.8 billion, significantly bolstered the overall capital account, which saw a net addition of USD 87 billion, up from USD 57.9 billion in FY23, according to the RBI.
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