India’s CAD Widens Marginally to 1.1% in Q1FY25

Mumbai: India’s current account deficit (CAD) widened marginally to $ 9.7 billion (1.1 per cent of GDP) in Q1:2024-25 from $ 8.9 billion (one

per cent of GDP) in Q1:2023-24 primarily due to a rise in imports. The current account was in surplus of $ 4.6 billion (0.5 per cent of GDP) in Q4:2023-24.

The current account deficit is a measurement of a country's trade where the value of the goods and services it imports exceeds the value of the products it exports.

“The widening of CAD on a year-on-year (y-o-y) basis was primarily due to a rise in merchandise trade deficit to US$ 65.1 billion in

Q1:2024-25 from US$ 56.7 billion in Q1:2023-24.

Net services receipts increased on a y-o-y basis to $ 39.7 billion in Q1:2024-25 from $ 35.1 billion a year ago. Services exports have risen on a y-o-y basis across major categories such as computer services, business services, travel services and transportation services.

Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $ 29.5 billion in Q1:2024-25 from $ 27.1 billion in Q1:2023-24.

After financing the CAD, the net accretion to the forex reserves on a balance of payment basis was just $5.2 billion in Q1 this fiscal, as compared to $24.4 billion in Q1 last fiscal. On a BoP basis, Q4FY24 saw net accretion of foreign exchange reserves of a robust $30.8 billion.

According to Aditi Nayar, chief economist and head research and outreach at ICRA Ltd, “Looking ahead, the spike in gold imports in

August 2024 following the custom’s duty reduction is likely to bloat this quarter’s current account deficit considerably to nearly 2 per cent of GDP. With gold imports unlikely to sustain this surge in the coming months, we expect the monthly merchandise trade deficit figures to ease. We foresee India’s CAD to average 1.1-1.2 per cent of GDP in FY25.”