Mumbai, June 30 (SocialNews.XYZ) India posted a marginal current account surplus in Q4FY20 on the back of lower trade deficit, along with higher remittances and an increase in investment flows, official data showed on Tuesday.
However, the Reserve Bank of India's data on India's Balance of Payments (BoP) showed that on a fiscal year basis, the current account balance was in deficit.
The current account is the net difference between inflows and outflows of foreign currencies.
In 2019-20, India's CAD narrowed to 0.9 per cent of the GDP in 2019-20 from 2.1 per cent in 2018-19 on the back of the trade deficit which shrank to $157.5 billion in 2019-20 from $180.3 billion in 2018-19.
On the quarterly basis, the current account balance recorded a marginal surplus of $0.6 billion (0.1 per cent of GDP) in Q4 of 2019-20 as against a deficit of $4.6 billion (0.7 per cent of GDP) in Q4 of 2018-19 and $2.6 billion (0.4 per cent of GDP) in the preceding quarter of Q3 of FY20.
"The surplus in the current account in Q4 of 2019-20 was primarily on account of a lower trade deficit at $35 billion and a sharp rise in net invisible receipts at $35.6 billion as compared with the corresponding period of last year," the RBI said in its statement on developments in India's Q4FY20 BoP.
"Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $20.6 billion, up by 14.8 per cent from their level a year ago."
In the financial account, net foreign direct investment at $12 billion was higher than $6.4 billion in Q4 of 2018-19.
But, Foreign Portfolio Investment (FPI) declined by $13.7 billion as against an increase of $9.4 billion in Q4 of 2018-19 - on account of net sales in both the debt and equity markets.
"Net inflow on account of external commercial borrowings to India was $9.4 billion in Q4 of 2019-20 as compared with $7.2 billion a year ago," the BoP statement said.
"Owing to Covid-19 related uncertainty, net inflows under 'other capital' surged during the quarter, reflecting inter alia the FPIs' outstanding balances with custodian banks and pending issuance of shares by FDI companies."
Additionally, the statement said that there was an accretion of $18.8 billion to the foreign exchange reserves (on a BoP basis) as compared with an accretion of $14.2 billion in Q4 of 2018-19.
"Contrary to our expectations of a deficit of $5.5-6.5 billion or 0.8 per cent of GDP in Q4 FY2020, the current account balance recorded a mild surplus of $0.6 billion, with secondary income flows holding up despite the fall in crude oil prices and burgeoning economic uncertainty," ICRA Principal Economist Aditi Nayar said.
Nayar also said that a current account surplus of $20-22 billion in FY2021 can be expeted on the back of a faster normalisation in merchandise exports relative to imports, a stabilisation in crude oil prices at a moderate level, a revival in demand for gold closer to the festive season, and some shrinkage in remittances owing to the economic uncertainty.
According to M. Govinda Rao, Chief Economic Advisor, Brickwork Ratings: "Going further, there will be substantial compression in exports due to the lockdown and supply disruptions including the restrictions on the imports from China."
"There will be a slowdown in the remittances as well. However, this may not threaten the current account balance as imports too are likely to be lower."
Source: IANS
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