India Witnesses Sequential Drop In CA Surplus


India’s current account surplus moderated to $15.5 billion in Q2FY21 from $19.2 billion reported for the first quarter of the current fiscal.

On a YoY basis, the country’s Balance of Payment status was in a deficit of $7.6 billion during Q2FY20.

“The narrowing of the current account surplus in Q2 of 2020-21 was on account of a rise in the merchandise trade deficit to $14.8 billion from $10.8 billion in the preceding quarter,” the RBI said in a statement on developments in India’s Q2FY21 BoP.

However, the data showed an increase in net services’ receipts both sequentially and on a YoY basis, primarily on the back of higher net earnings from computer services.

“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.”

“Net outgo from the primary income account, primarily reflecting net overseas investment income payments, increased to $9.3 billion from $8.8 billion a year ago.”

In terms of financial account, the data pointed out an inflow in net foreign direct investment of $24.6 billion as compared with $7.3 billion in Q2 of 2019-20.

“Net foreign portfolio investment was $7 billion as compared with $2.5 billion in Q2 of 2019-20, largely reflecting net purchases in the equity market.”

“With repayments exceeding fresh disbursals, external commercial borrowings to India recorded net outflow of $4.1 billion in Q2 of 2020-21 as against an inflow of $3.1 billion a year ago.”

Besides, the data cited a moderation in net accretions to non-resident deposits to $1.9 billion from $2.3 billion in Q2 of 2019-20.

“There was an accretion of $31.6 billion to the foreign exchange reserves (on a BoP basis) as compared with that of $5.1 billion in Q2 of 2019-20.”

ICRA’s Principal Economist Aditi Nayar said: “India’s current account surplus remained robust in Q2 FY2021, despite the entirely expected moderation from the level recorded in the lockdown quarter, given the rise in imports in tune with the resumption in economic activities.”

“The emergence of logistical challenges, and fresh restrictions that have been imposed in some major trading partners to ward off rising Covid-19 infections, have interrupted the improvement in exports in Q3 FY2021. We expect a tempered revival in exports in Q4 FY2021, that would remain prone to hiccups related to Covid-related restrictions in the trading partners.”

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