India’s current account improves as trade deficit shrinks

India’s current account deficit narrowed in the September quarter of the fiscal year as the trade deficit shrank, central bank data showed yesterday.

The current account deficit declined to 0.9 per cent of gross domestic product in the second quarter of the fiscal year ending March 2020 from 2.9pc in the same period a year ago. On a quarterly basis, it shrank from 2.0pc of GDP in the June quarter. The deficit measures the difference between the value of a country’s imported and exported goods and services.

“The contraction ... was primarily on account of a lower trade deficit at $38.1 billion as compared with $50.0 bn a year ago,” the Reserve Bank of India said in the release. The trade deficit stood at $12.12 bn in November compared with $16.67 bn a year earlier, trade ministry data showed earlier this month.

The current account deficit stood at $6.3 bn in the September quarter versus $19 bn a year ago. The merchandise trade deficit narrowed to $38.1 bn from $50.0 bn, the central bank said.

Balance of payments, the difference between the current account and capital account, stood at a surplus of $5.1 bn in the September quarter compared with a deficit of $1.9 bn a year ago, data showed.

However, the narrowed from $14 bn seen in the June quarter. Net inflow on account of external commercial borrowings stood at $3.2 bn compared with $2.0 bn last year. Net foreign direct investment was largely unchanged at $7.4 bn.