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Marginal current account surplus in Q4
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SME Times News Bureau | 30 Jun, 2020
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."
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
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84.65 |
Euro
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78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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