Current Account Deficit Narrows Sharply to 1.7 Per Cent in Q1

New Delhi: India's current account deficit narrowed sharply to 1.7 per cent of GDP in the April-June quarter of the ongoing fiscal year mainly on account of reduction in trade deficit and a steep decline in gold imports.

"The lower CAD (current account deficit) was primarily on account of a contraction in the trade deficit contributed by both a rise in exports and a decline in imports," the RBI said in a statement.

Current account deficit narrowed sharply to $7.8 billion, or 1.7 per cent of GDP, in the first quarter of fiscal year 2014-15 from $21.8 billion (4.8 per cent of GDP) in the year-ago period.

However, it was higher than $1.2 billion (0.2 per cent of GDP) in the fourth (January-March) quarter of the previous fiscal year (2013-14).

The decline in imports was primarily led by a steep 57.2 per cent fall in gold imports, which amounted to $7 billion - significantly lower than $16.5 billion in the April-June quarter of 2013-14, the RBI said.

Trade deficit contracted by about 31.4 per cent to $34.6 billion in the fiscal first quarter from $50.5 billion in Q1, 2013-14.

Exports increased 10.6 per cent to $81.7 billion. Imports moderated by 6.5 per cent to $116.4 billion.

Current account deficit, which is the difference between the inflow and outflow of foreign currency, had touched a record high of $87.8 billion (4.8 per cent) in fiscal year 2012-13 mainly on account of steep increase in gold imports.

It had narrowed to $32.4 billion (1.7 per cent) for the entire fiscal year 2013-14 after government imposed import restrictions on the precious metal.

As per the Balance of Payments (BoP) data released on the same day, on net basis, both foreign direct investment and portfolio investment recorded inflows in the first quarter of 2014-15.

While net inflow on account of portfolio investment was $12.4 billion, net FDI inflow was substantially higher at $8.2 billion.

"There was a net accretion of $11.2 billion to India's foreign exchange reserves in first quarter of 2014-15 as against a draw-down of $0.3 billion in Q1 of 2013-14," the RBI said.

This is the third straight quarter in which there has been a net addition to foreign exchange reserve, reflecting an improvement in the BoP situation.

Net inflows of NRI deposits amounted to $2.4 billion in June quarter of 2014-15 as compared to $5.5 billion in the same quarter of previous fiscal year.