Economic slowdown narrows India’s Q4 current account deficit to lowest in 2 years

The deficit was $4.6 billion in the January-March period, or 0.7 per cent of GDP.

Workers unload crates of sauce onto shelves at a warehouse of Big Basket (Representational Image) | Samyukta Lakshmi | Bloomberg

Mumbai: India’s current-account deficit narrowed last quarter as a slowdown in the economy sapped imports.

The shortfall was $4.6 billion in the January-March period, or 0.7 per cent of gross domestic product, the Reserve Bank of India said in a statement in Mumbai on Friday. That compares with a median $6.1 billion deficit estimated in a Bloomberg survey.

Key Insights

• The gap is smaller than the previous quarter’s $17.7 billion, or 2.7 per cent of GDP. It compares with a deficit of 1.8 per cent of GDP in the year-earlier period.
• The deficit narrowed as imports slowed sharply during the quarter on the back of a broader slump in consumption, which accounts for more than 60 per cent of India’s GDP. A decline in discretionary consumer purchases came amid growth in Asia’s third largest economy cooling to a five-year low of 5.8 per cent in the three months to March.
• Bloomberg Economics’ Abhishek Gupta said the key reason for a narrower current-account gap was lower crude oil prices. Reduced investment income outflows and higher remittances relative to a year-ago period also caused the gap to shrink

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• The gap in merchandise trade narrowed to $35.2 billion in the quarter to March from a gap of $41.6 billion the previous year.
• Net services receipts increased by 5.8 per cent year-on-year, the RBI said.
• To read the full RBI statement, click here.