current account: Current Account is in surplus for second consecutive quarter at 2.4% of GDP – The Economic Times

Clipped from: https://economictimes.indiatimes.com/news/economy/finance/current-account-is-in-surplus-for-second-consecutive-quarter-at-2-4-of-gdp/articleshow/80031028.cms?utm_source=ETTopNews&utm_medium=HPTN&utm_campaign=AL1&utm_content=23Synopsis

The narrowing of the current account surplus in was on account of a rise in the trade deficit to $ 14.8 billion from $ 10.8 billion in the preceding quarter, according to release by the central bank.

Mumbai: India’s current account in the balance of payments continued to remain in surplus for the second consecutive quarter in the quarter ended September’ 20 at 2.4 per cent of GDP as imports shrank due to Covid induced economic contraction. The current fiscal may end in a surplus for the first time since 2003-04.

India’s current account surplus- excess Exports of goods and services- moderated to $ 15.5 billion or at 2.4 per cent of GDP in the July-September’20 quarter from $ 19.2 billion or at 3.8 per cent of GDP in the April-June’20 quarter, according to the preliminary estimates released by the Reserve Bank of India. But the current account deficit was at $ 7.6 billion or at 1.1 per cent of GDP in Q2 of 2019-20.

The narrowing of the current account surplus in was on account of a rise in the trade deficit to $ 14.8 billion from $ 10.8 billion in the preceding quarter, according to release by the central bank.” Presently the trade deficit has been widening with oil prices exerting some pressure” said Madan Sabnavis chief economist Care Ratings.

Private transfer receipts, mainly representing remittances by Indians employed overseas, declined on a y-o-y basis but improved sequentially by 12 per cent to $ 20.4 billion in Q2 2020-21.

“As the domestic recovery strengthens, we expect the current account surplus to decline substantially to under $5 billion in H2 FY2021” said Aditi Nayyar, chief economist at Care Ratings.

The second quarter witnessed strong capital flows on the strong foreign direct investment as well as portfolio inflows. While net FDI inflows amounted to $ 24.6 billion July-September’20 compared to $ 7 billion n the same period a year ago, net portfolio flows amounted to $ 7 billion during the quarter compared to $2.5 billion in the same period a year ago. As a result capital account surplus at $15, 4 billion during the quarter was higher than $ 12 billion in the same period a year ago

Overall balance of payments ended in a higher surplus of $31.6 billion during the quarter compared to a surplus of $ 5 billion in the same period a year ago. “For the entire year we could still expect a current account surplus which is already 3.1% of GDP in H1. This can be between 1-1.5% of GDP” said Sabnavis.

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