MUMBAI : India posted a record current account surplus of $ 19.8 billion in the April-June quarter due to falling imports.
The quarter also saw a decline in net foreign portfolio and foreign direct investment, while remittances from foreign workers fell.
The current account surplus increased sharply to 3.9% of gross domestic product (GDP) in the first quarter, compared with 0.1% in the previous quarter.
This is the second consecutive quarter in which the country has registered a current account surplus.
Income from private transfers, which mainly represent remittances from Indians employed abroad, rose to $ 18.2 billion, 8.7% less than a year ago.
On the financial account, net foreign direct investment of $ 0.4 billion was less than $ 14 billion in the first quarter of 2019-20. Foreign portfolio investment recorded net inflows of $ 0.6 billion, against an outflow of $ 4.8 billion in the first quarter of 2019-20 on account of net purchases in the debt and equity markets.
“The current account surplus in the first quarter of 2020-21 was due to a sharp contraction of the trade deficit to $ 10 billion due to a steeper drop in merchandise imports relative to exports on an annual basis.” according to the Reserve Bank of India.
The surplus was above expectations, as the decline in remittances was remarkably moderate, despite adverse global economic conditions amid the ongoing pandemic, Icra said.
“With a merchandise trade deficit of $ 11.6 billion in July-August 2020 ($ 27.3 billion in July-August 2019), which exceeds the $ 9.1 billion recorded in the first quarter of fiscal year 2021, Icra anticipates that the size of the current account surplus would be cut in half to around $ 10 billion in Q2 FY2021, “according to the rating agency.
Icra has revised its expectation of the size of India’s current account balance in fiscal year 2021 to $ 35 billion or around 1.4% of GDP.
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