India reports current account surplus of 0.9% in FY21

India reports current account surplus of 0.9% in pandemic-affected FY21

Net invisible receipts were lower in FY21 due to an increase in net outgo of overseas investment income payments and lower net private transfer receipts

The RBI said the current account balance swung into the surplus territory on the back of a sharp contraction in the trade deficit. Credit: Reuters Photo

India reported a current account surplus of 0.9 per cent of GDP in the pandemic-hit FY21, as against a deficit of 0.9 per cent in FY20, data released by the RBI showed on Wednesday.

The country's current account deficit widened to $8.1 billion or 1 per cent of GDP for the March quarter, as against a surplus of $0.6 billion or 0.1 per cent of the GDP in the year-ago period and a deficit of 0.3 per cent in the preceding December quarter, as per the central bank data.

The CAD, the gap between the country's overall foreign receipts and payments, is an important factor representing a nation's external sector's strength.

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The Reserve Bank of India said the current account balance swung into the surplus territory on the back of a sharp contraction in the trade deficit to $102.2 billion from $157.5 billion in 2019-20.

Net invisible receipts were lower in FY21 due to an increase in net outgo of overseas investment income payments and lower net private transfer receipts, even though net services receipts were higher than the year-ago period, it said.

Despite the pandemic, the net foreign direct investment inflows at $44 billion were higher in FY21 than the $43.0 billion in 2019-20, the central bank added.

Net foreign portfolio investments also increased by $36.1 billion in FY21 as compared to $1.4 billion a year ago, it said.

External commercial borrowings by India Inc recorded an inflow of $0.2 billion as compared to $21.7 billion in 2019-20, the RBI data showed.

There was an accretion of $87.3 billion to foreign exchange reserve on a balance of payments basis, it said.

The current account deficit in the March quarter was higher primarily on account of a higher trade deficit and lower net invisible receipts than in the corresponding period of the previous year, the RBI said.

Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $20.9 billion, up by 1.7 per cent from the year-ago level.

Net outgo from the primary income account, primarily reflecting net overseas investment income payments, increased to $8.7 billion from $4.8 billion a year ago, according to the data.

The net FDI came at $2.7 billion during the March quarter as against $12 billion in the year-ago period.

Net foreign portfolio investment (FPI) increased by $7.3 billion – mainly on account of net purchases in the equity market – as against a decline of $13.7 billion in Q4 FY20.

Net external commercial borrowings to India was lower at USD 6.1 billion in the March quarter as compared to $9.4 billion a year ago, the RBI said. 

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