India achieved a current account surplus of USD 5.7 billion, equivalent to 0.6 per cent of GDP, in the March quarter, marking a significant turnaround from a deficit of USD 1.3 billion or 0.2 per cent of GDP in the same period last year. The Reserve Bank of India (RBI) released these figures on 24 June, highlighting the nation’s economic recovery driven by robust service exports and remittances.
The improvement is stark compared to the preceding quarter ending December 2023, which saw a current account deficit of USD 8.7 billion or 1 per cent of GDP. For the entire fiscal year 2023-24 (FY24), the current account deficit narrowed to USD 23.2 billion or 0.7 per cent of GDP from USD 67 billion or 2 per cent of GDP in FY23, according to the RBI's report on Developments in India's Balance of Payments.
The January-March 2024 period recorded a merchandise trade deficit of USD 50.9 billion, a slight decrease from USD 52.6 billion a year ago. A key driver of the surplus was the net services receipts, which rose to USD 42.7 billion from USD 39.1 billion, reflecting a 4.1 per cent growth in the services sector.
Private transfer receipts, primarily remittances from Indians working abroad, saw a notable increase of 11.9 per cent, reaching USD 32 billion in the March quarter. Non-resident deposits also surged, climbing to USD 5.4 billion compared to USD 3.6 billion in the year-ago period.
However, there was an increase in the net outgo on the primary income account, which mainly includes payments of investment income. This figure rose to USD 14.8 billion from USD 12.6 billion in the previous year.
Despite these gains, net foreign direct investment (FDI) flows decreased significantly to USD 2 billion in Q4 FY24 from USD 6.4 billion a year ago. Conversely, foreign portfolio investment (FPI) recorded a substantial net inflow of USD 11.4 billion during the quarter, a reversal from a net outflow of USD 1.7 billion in the same period last year. Additionally, net inflows under external commercial borrowings were USD 2.6 billion, up from USD 1.7 billion.
For the fiscal year as a whole, portfolio investment showed a strong net inflow of USD 44.1 billion, a significant turnaround from a net outflow of USD 5.2 billion in FY23. However, net FDI flows declined to USD 9.8 billion from USD 28 billion the previous fiscal year.
The RBI’s report underscores India's progress in stabilising its balance of payments through enhanced service exports and increased remittances, reflecting a resilient economic environment amid global uncertainties.
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