India’s Current Account Deficit Highest In Six Years With 2.1 Per Cent

India’s CAD for the fiscal year 2019 has extended to 2.1 per cent of the gross domestic product (GDP). The CAD or the current account deficit is the net of foreign exchange inflows and outflows, which stood at 48. 7 billion dollars in the fiscal year 2018.

The CAD for FY19 is recorded to be the highest in six years owing to a higher trade deficit caused by high crude oil imports. However, the deficit in the fourth quarter, end of 2018 March was lower at 0.7 per cent of GDP, as compared to 1.8 per cent of GDP in the same period a year ago.

Current account deficit (CAD) is the excess of the country’s imports over exports. Preliminary figures released by the Reserve Bank of India for the fiscal year ended March 2019 amounted to 57.2 billion dollars or 2.1 per cent of GDP compared to 48.7 billion dollars in FY19 or 1.8 per cent of GDP.

Mainly due to a higher oil import bill, the country’s trade deficit increased to 180.3 billion dollars in 2018-19 from 160 billion dollars in 2017-18, with the latest CAD numbers being the highest in about 6 years in terms of percentage of GDP.

For the quarter ended in March 2019, the CAD stood at 4.6 billion dollars or 0.7 per cent of GDP in Q4 of 2018-19 narrowed from 13.0 billion dollars or 1.8 per cent of GDP in Q4 of 2017-18 and 17.7 billion dollars or 2.7 per cent of GDP in the preceding quarter. This reduction of the current account deficit on a year- on- year (y-o-y) basis was mainly because of a lower trade deficit at 35.2 billion dollars as compared with 41.6 billion dollars a year ago. Capital account on the other hand ended with a lower surplus of 19 billion dollars for the quarter ended March 2019 as compared to net inflows of 25 billion in the same period a year ago on account of a slowdown in the portfolio flows.