India experienced a significant reduction in its current account deficit during the fourth quarter of fiscal year 2022-23, amounting to $1.3 billion, which accounted for 0.2% of the GDP. This improvement was primarily attributed to a moderation in the trade deficit and robust services exports. In contrast, the trade deficit widened to $265.3 billion in the entire financial year FY23, compared to $189.5 billion in the previous year.
The fourth quarter also saw a notable sequential rise in Foreign Direct Investment (FDI), reaching $6.4 billion. However, the country's foreign exchange reserves declined considerably during this period.
According to the Reserve Bank of India's latest data, the current account deficit for Q2 of the financial year 2022-23 stood at $1.3 billion, representing 0.2% of the GDP.
During the previous quarter, the Current Account Deficit (CAD) was reported at $16.8 billion, which accounted for 2% of the GDP. In comparison, a year ago, in Q4, the CAD stood at $13.4 billion, equivalent to 1.6% of the GDP.
According to the Reserve Bank of India's balance of payments notification, the sequential decline in CAD during Q4 of the fiscal year 2022-23 was primarily due to a moderation in the trade deficit, which decreased to $52.6 billion from $71.3 billion in the preceding quarter (Q3:2022-23). Additionally, robust services exports contributed to this positive trend.
The country experienced a notable increase in net services receipts both sequentially and on a year-on-year basis, primarily driven by higher net earnings from computer services.
Furthermore, the central bank's data revealed a significant rise in private transfer receipts, mainly representing remittances sent by Indians employed overseas, reaching $28.6 billion, indicating a notable 20.8% increase from the corresponding period a year earlier.
Moreover, there was a year-on-year increase in the net outgo on the primary income account, mainly reflecting net income payments on foreign investment, while showing a slight sequential decline.
Concerning financial accounts, India observed a net foreign direct investment (FDI) of $6.4 billion in Q4FY23, which surpassed the $2 billion recorded in Q3 of FY23. However, the FDI was lower when compared to the $13.8 billion reported a year ago in Q4.
During Q4, the foreign exchange reserves experienced a positive growth on a Balance of Payments (BoP) basis, amounting to $5.6 billion, in contrast to a depletion of $16 billion in Q4 of FY22.
For the entire fiscal year FY23, the current account
balance recorded a deficit of 2% of GDP, as compared to a deficit of 1.2% in
FY22. This was primarily due to the trade deficit widening to $265.3 billion
from $189.5 billion a year ago. Net FDI inflows for the year 2022-23 were $28
billion, lower than the $38.6 billion in 2021-22. Additionally, in 2022-23,
there was a depletion of $9.1 billion in foreign exchange reserves on a BoP
basis.
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