India’s current account gap narrows, BoP in surplus in Q2 FY24 – cenbank

© Reuters. FILE PHOTO: A general view of Mumbai’s central financial district, India, November 22, 2017. REUTERS/Danish Siddiqui/File Photo

By Swati Bhat

MUMBAI (Reuters) -India’s current account deficit narrowed more than expected in the July-September quarter largely due to a lower merchandise trade deficit while services exports also grew, the central bank said in a statement on Tuesday.

The current account deficit stood at $8.3 billion, or 1% of GDP, in the second quarter of fiscal 2023/24 compared with $9.2 billion or 1.1% of GDP in the preceding quarter.

The CAD had been at $30.9 billion or 3.8% in the same quarter a year ago.

The median forecast in a Reuters poll of 18 economists was for a deficit of $9 billion.

“Following the expansion in the merchandise trade deficit in October 2023, we expect the CAD for the ongoing quarter to widen appreciably, to around $18-20 billion,” said Aditi Nayar, Chief Economist, Head – Research at rating agency ICRA, adding that the Q2 number was well below their forecast of $13 billion.

“Nevertheless, we now foresee the FY2024 CAD in a range of 1.5-1.6% of GDP, unless commodity prices chart a sharp rebound.”

Merchandise trade deficit narrowed to $61 billion in the quarter, from $78.3 billion in the year-ago quarter.

“Services exports grew by 4.2% on a y-o-y basis on the back of rising exports of software, business and travel services. Net services receipts increased both sequentially and on a y-o-y basis,” the central bank said.

India’s merchandise trade deficit narrowed sharply to $20.58 billion in November from the previous month’s record levels as imports of gold, petroleum and electronic goods moderated, latest data showed.

Private transfer receipts, which are mainly remittances by Indians employed overseas, rose 2.6% to $28.1 billion on year.

The country’s balance of payments recorded a small surplus of $2.5 billion in the September quarter, compared with a deficit $30.4 billion a year ago. The surplus, however, narrowed sharply on a sequential basis from $24.4 billion in the June quarter.

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