India's current account deficit narrowed to USD 1.3 billion or 0.2 per cent of GDP in the January-March quarter of FY23, mainly due to moderation in the trade deficit and a robust increase in services exports, RBI data showed on Tuesday.
However, for the 2022-23 fiscal, the current account balance recorded a deficit of 2 per cent of GDP compared to 1.2 per cent in 2021-22.
"India's current account deficit (CAD) decreased to USD 1.3 billion (0.2 per cent of GDP) in Q4:2022-23 from USD 16.8 billion (2.0 per cent of GDP) in Q3:2022-231, and USD 13.4 billion (1.6 per cent of GDP) a year ago [Q4:2021-22]," as per the RBI's 'Developments in India's Balance of Payments during the Fourth Quarter (January-March) of 2022-23'.
The sequential decline in CAD in the fourth quarter of 2022-23 was mainly on account of a moderation in the trade deficit to USD 52.6 billion from USD 71.3 billion in the preceding quarter, coupled with robust services exports, it said.
Net service receipts
Net services receipts increased, on a sequentially and year-on-year (y-o-y) basis, on the back of a rise in net earnings from computer services.
The central bank had been maintaining that the CAD, a key indicator of the country's balance of payments, would remain manageable.
Private transfer receipts in the January-March period, mainly representing remittances by Indians employed overseas, increased to USD 28.6 billion, up by 20.8 per cent year-on-year.
In the financial account, the RBI said net foreign direct investment (FDI) at USD 6.4 billion was higher than USD 2.0 billion in Q3 2022-23, although lower than a year ago (USD 13.8 billion).
Net foreign portfolio investment (FPI) recorded an outflow of USD 1.7 billion - driven by the equity segment compared to an outflow of USD 15.2 billion during the corresponding period a year ago.
Net external commercial borrowings (ECBs) to India recorded an inflow of USD 1.7 billion against an outflow of USD 2.5 billion during the third quarter of 2022-23 and an inflow of USD 3.3 billion in the final quarter of 2021-22.
"There was an accretion to the foreign exchange reserves (on a BoP basis) to the tune of USD 5.6 billion as against a depletion of USD 16 billion in Q4:2021-22," the RBI said.
Regarding BoP during 2022-23, the RBI said the current account balance recorded a deficit of 2.0 per cent of GDP in 2022-23 compared to a deficit of 1.2 per cent in 2021-22 as the trade deficit widened to USD 265.3 billion from USD 189.5 billion a year ago.
Net invisible receipts were higher in 2022-23 due to an increase in net exports of services and net private transfer receipts, even though net income outgo was higher year-on-year.
Net FDI inflows at USD 28 billion in 2022-23 were lower than USD 38.6 billion in 2021-22.
The fiscal year also witnessed a depletion of USD 9.1 billion of the foreign exchange reserves (on a BoP basis).