India's current account deficit (CAD) dropped sharply to $300 million or 0.1 per cent of GDP in the fourth quarter of 2015-16 on account of lower trade deficit, Reserve Bank of India (RBI) said in Mumbai on Thursday.

"India's CAD narrowed sharply to $0.3 billion (0.1 per cent of GDP) in Q4 of 2015-16, significantly lower than $7.1 billion (1.3 per cent of GDP) in Q3 of 2015-16 and marginally lower than $0.7 billion (0.1 per cent of GDP) in Q4 of 2014-15," RBI said in a statement.

"The contraction in CAD was primarily on account of a lower trade deficit ($24.8 billion) than in Q4 of last year ($31.6 billion)," it said.

The RBI also said foreign exchange reserves (on a balance of payment basis) increased by $3.3 billion in January-March quarter of 2015-16.

On a cumulative basis, the CAD contracted to 1.1 per cent of GDP in 2015-16 from 1.8 per cent in 2014-15, on the back of contraction in the trade deficit.

"Net services receipts declined on a year-on-year basis largely due to fall in exports of transport, financial services and telecommunication, computer and information services," it said.

In 2015-16, there was an accretion of $17.9 billion to foreign exchange reserves (on a balance of payment basis), as compared to $61.4 billion in 2014-15.

Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $ 15.7 billion, a decline from their level in the preceding quarter as well as from a year ago.

Net foreign direct investment (FDI) moderated in fourth quarter of 2015-16 and stood at $8.8 billion from $9.3 billion in corresponding quarter of 2014-15.