Current Account Deficit: The country’s current account deficit (CAD) widened to $23.9 billion in the first quarter of the financial year 2022-23. This is 2.8 percent of the GDP. CAD has increased mainly due to widening trade deficit. In the first quarter of the last financial year 2021-22, the country’s current account surplus was $ 6.6 billion, which is 0.9 percent of GDP.
CAD increased as compared to the same quarter last year
According to the Reserve Bank of India’s balance of payments data for the first quarter (April-June) of 2022-23, there was a deficit of $23.9 billion on the current account front, which is 2.8 percent of GDP. In the January-March quarter of the last financial year 2021-22, CAD was $13.5 billion, or 1.5 per cent of GDP.
Current account deficit widens due to increase in commodity trade deficit
RBI said, “The increase in CAD in the first quarter of the current financial year is due to widening of the commodity trade deficit and higher net investment income payments. The commodity trade deficit stood at $ 68.6 billion in the first quarter of 2022-23, as compared to 2021- It was $54.5 billion in the fourth quarter of 22.” It also said that net service realization has increased on both quarterly and year-on-year basis due to increase in exports of computers and business services.
What did the RBI data reveal
According to RBI data, private transfer receipts stood at $25.6 billion in the first quarter of 2022-23, up 22.6 per cent over the same period a year ago. It is mainly a money order sent by an Indian working abroad. Net FDI in the financial account increased to $13.6 billion from $11.6 billion in the same period a year ago.
Dollar withdrawals increased
According to the data, there was an outflow of $ 14.6 billion under net foreign portfolio investment, while there was a net inflow of $ 400 million in the first quarter of 2021-22. Whereas, net inflows under overseas deposits stood at $300 million in the first quarter of 2022-23, up from $2.5 billion in the same quarter of 2021-22. Current account deficit is a major indicator of the balance of payments position. The current account includes exports and imports of goods and services and international transfers.
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