Narrowing trade deficit, rise in remittances aid current account surplus: CRISIL

Kolkata: India's current account surplus in the fourth quarter of the 2023-24 fiscal was aided by narrowing of the merchandise trade deficit, an increase in remittances and a surplus in services trade, according to a CRISIL report released on Wednesday.

The country's current account recorded a surplus of USD 5.7 billion, which is 0.6 per cent of the GDP, in the fourth quarter of the last financial year.

It was in deficit of USD 8.7 billion, equivalent to one per cent of GDP, in the third quarter of the 2023-24 fiscal, the report said.

In the corresponding fourth quarter of 2022-23, the country's current account was also in deficit of USD 1.3 billion, which was 0.2 per cent of the GDP.

"The improvement in current account balance to 0.6 per cent of GDP surplus in Q4 fiscal 2024, from a deficit of 0.2 per cent of GDP a year ago reflects improvement on all three fronts i.e. merchandise trade deficit narrowed, services trade surplus increased and remittances rose," the CRISIL report said.

Financial flows also increased leading to accretion in foreign exchange reserves during the fourth quarter amounting to USD 30.8 billion, it said. The country's foreign reserves, as of June 14, 2024, stood at USD 652.9 billion.

The report said even though the FDI inflows continued, there has also been a rise in outward FDI, leading to a reduction in net flows, the report said.

Healthy momentum in goods exports and expected moderation in imports suggest that the current account deficit (CAD) is likely to remain manageable this financial year (2024-25) as well.

Strong external buffers are crucial at this juncture because of global risks stemming from geopolitical uncertainties, tariff and trade wars have heightened, the report added.