India’s current account balance records surplus in Q4 2023-24

India recorded a current account surplus of US$5.7 billion in Q4 2023-24

June 25, 2024

This surplus, 0.6% of GDP, contrasts with the US$8.7 billion deficit in the previous quarter

The full fiscal year 2023-24 saw a reduced deficit of US$23.2 billion, or 0.7% of GDP

Service exports grew by 4.1% year-on-year, driven by software, travel, and business services

Private transfer receipts, mainly remittances, increased by 11.9% to US$32 billion

The Reserve Bank of India (RBI) reported that India’s current account balance showed a surplus in the January-March quarter, primarily due to the significant growth in service exports and increased private transfer receipts. The current account surplus was US$5.7 billion, or 0.6% of GDP, in Q4 of the fiscal year 2023-24, a substantial improvement from the US$8.7 billion deficit, or 1% of GDP, recorded in the previous quarter.

This marks a significant positive shift compared to the same quarter a year earlier when the deficit was US$1.3 billion, or 0.2% of GDP. For the entire fiscal year, the deficit moderated to US$23.2 billion, or 0.7% of GDP, from US$67 billion, or 2% of GDP, the previous year, a clear sign of economic improvement, helped by a lower merchandise trade deficit.

Service exports increased by 4.1% year-on-year in the fiscal fourth quarter, driven by rising software, travel, and business services exports. Net services receipts were US$42.7 billion, higher than the US$39.1 billion recorded a year earlier, contributing to the surplus.

The merchandise trade deficit narrowed to US$50.9 billion in the quarter, compared to US$52.6 billion a year earlier. In May, it was US$23.78 billion, up from US$19.1 billion in April. Private transfer receipts, mainly remittances by Indians employed overseas, rose 11.9% year-on-year to US$32 billion.

Madan Sabnavis, chief economist at Bank of Baroda, provided a reassuring outlook, noting that India’s current account deficit (CAD) is expected to be manageable at 1-1.5% of GDP in the fiscal year 2024-25. This is due to steady capital inflows ensuring that the balance of payments remains comfortable, instilling confidence in India’s economic stability.

Source: Business Standard

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