India's current account deficit in March 2022 quarter is $13.4 billion

23 Jun 2022 , 08:42 AM

According to data issued by the Reserve Bank of India (RBI) on June 22, India’s current account deficit (CAD) decreased from $22.2 billion from October to December 2021 to $13.4 billion from January to March 2022.

Between January and March 2021, the deficit was $8.1 billion. In terms of a percentage, the CAD fell from 2.6 percent of GDP in the preceding quarter to 1.5 percent of GDP in January—March 2022.

The central bank stated that the sequential reduction in the CAD in Q4:2021—22 (January—March) was primarily due to a stabilization in the trade deficit and a smaller net outgo of primary income.

India’s merchandise trade deficit decreased from $59.8 billion to $54.5 billion in the first quarter of 2022, which helped lower the CAD. The trade surplus for services increased slightly from $27.8 billion in October-December 2021 to $28,3 billion in that same period.

A decreased net outlay of primary income, which came to $8.4 billion in the most recent quarter, also helped to reduce the current account deficit.

The net outlay of primary income from October through December 2021 was $11.5 billion. Employee pay and investment income are included in primary income.

Although the quarterly current account deficit decreased, India’s current account deficit for FY22 increased to $38.7 billion, reaching a three-year record as a result of the merchandise trade deficit nearly tripling to $189.5 billion from $102.2 billion in FY21.

India’s import bill increased in FY22 for two reasons: first, imports increased as the economy recovered, and second, global commodity prices, especially the price of crude oil, increased.

In terms of GDP, the CAD reported a deficit in FY22 of 1.2 percent, up from FY21’s 0.9 percent. India’s annual CAD last reached a higher level in FY19, when it totaled $57.3 billion.