In the April to June quarter, India's current account deficit increased to $9.2 billion: RBC data

On a sequential basis, India's current account deficit increased to $9.2 billion in the first quarter of FY24, but it decreased year over year. According to Reserve Bank of India figures released on Thursday, the CAD represents around 1.1% of the GDP. The CAD for the period of January through March was $1.3 billion, or 0.2% of GDP. It was $17.9 billion in April to June 2022, or 2.1% of GDP.

The RBI stated that the widening of the CAD on a quarter-over-quarter basis was principally due to an increase in the trade deficit combined with a decrease in the net services surplus and a reduction in private transfer receipts. 

According to data from the RBI, the external debt to GDP ratio decreased from 18.8% at the end of March 2023 to 18.6% at the end of June 2023.

India's services trade surplus increased from $31.1 billion to $35.1 billion in April–June 2023, however it was still less than the $39.1 billion recorded in January–March 2023.

The merchandise trade deficit decreased from $63.1 billion to $56.6 billion, above the $52.6 billion recorded during January through March 2023.

For the first time in the previous seven quarters, the CAD narrowed in the January-March quarter of FY23.

"Net services receipts decreased sequentially, primarily due to a decline in exports of computer, travel, and business services," the RBI stated.

India's trade deficit in the first six months of 2023 was $21.5 billion, up from the first quarter of 2023's $13.5 billion, which was a decrease from the first six months of 2022, when it was $32.0 billion.

Long-term debt (with an original duration of more than a year) was valued at $505.5 billion at the end of June 2023, representing an increase of $9.6 billion from its level at the end of March 2023.

Short-term debt, defined as debt having an original maturity of less than one year, represented 19.6% of total foreign debt at the end of June 2023, down from 20.6 percentage points at the end of March 2023. The ratio of short-term debt (original maturity) to foreign exchange reserves also decreased, falling to 20.8% at the end of June 2023 from 22.2% at the end of March 2023.

"India’s current account deficit (CAD) widened to $9.2 billion (-1.1% of GDP) in Q1 FY2024 from $1.3 billion in Q4 FY 2023 (-0.2% of GDP), but trailed our forecast led by a healthier than anticipated merchandise trade balance, even as the services trade surplus and balance of secondary income were smaller than anticipated.  With the average merchandise trade deficit trending higher in Jul-Aug 2023 relative to Q1 FY2024 levels, and the recent rise in crude oil prices, ICRA estimates the CAD to widen sequentially to $19-21 billion (-2.3% of GDP) in Q2 FY2024. Overall, ICRA projects the CAD to widen to $73-75 billion (-2.1% of GDP) in FY2024 from $67.0 billion (-2.0% of GDP) in FY2023, building in an average crude oil price of $90/bbl in H2 FY2024," said Aditi Nayar, Chief Economist, Head - Research & Outreach, ICRA Ltd.