India cad: India records current account deficit (CAD) of 1.2% in FY22

India’s current account deficit (CAD) for the quarter ended March 22 was sequentially narrowed to 1.5 per cent of GDP as remittances from overseas Indians as well as software exports surged and the outflow from dividend and interest payouts fell, data from the RBI shows. Significantly, CAD at 1.2 percent of GDP for FY’22 at 1.2 percent of GDP turned out to be better than the market forecast at upto 1.5 percent of the GDP.

India’s CAD decreased to $ 13.4 billion (1.5 per cent of GDP) in Q4’2021-22 from $ 22.2 billion (2.6 per cent of GDP) in Q3’2021-22 according to the preliminary estimates released by the Reserve Bank of India on Wednesday. But it was higher than $ 8.1 billion (1.0 per cent of GDP) in Q4’2020-21 on account of a sharper rise in trade deficit

But major component of `Invisibles’ reflecting services and investment income flows did better sequentially as well as year-on-year basis. Net services receipts increased, both sequentially and on a year-on-year (y-o-y) basis, on the back of a rise in net earnings from computer and business services, the RBI said in a release.

Private transfer receipts, mainly reflecting remittances by Indians employed overseas, increased to $ 23.7 billion, up by 13.4 per cent from their level a year ago. Net outgo from the primary income account, largely reflecting net income payments on foreign investment, decreased sequentially as well as on a y-o-y basis.

For the entire fiscal year, the current account balance recorded a deficit of 1.2 per cent of GDP in 2021-22 as against a surplus of 0.9 per cent in 2020-21 as the trade deficit widened to $189.5 billion from $102.2 billion a year ago. But most market analysts had forecast higher CAD for the fiscal as crude and commodity prices surged during the year. Net invisible receipts were higher in 2021-22 due to increase in net exports of services and net private transfer receipts, even though net income outgo was higher than a year ago. Overall balance of payments surplus in FY’22 almost halved to $47.5 billion from $87.3 billion a year ago.

On a balance of payments basis (i.e., excluding valuation effects), foreign exchange reserves increased by $ 47.5 billion during 2021-22 as compared with $ 87.3 billion during 2020-21 according to the data on sources of Variation in Foreign Exchange Reserves in India during 2021-22 released by the RBI on Friday. Foreign exchange reserves in nominal terms (including valuation effects) increased by $ 30.3 billion during 2021-22 as compared with $ 99.2 billion during 2020-21.