India's current account surplus increased to $19.8 billion or 3.9 per cent of GDP for the June quarter as merchandise imports declined amid the COVID-19 pandemic, the Reserve Bank said on Wednesday. The country's current account surplus had come at $0.6 billion or 0.1 per cent of GDP in the preceding March quarter, while it had reported a current account deficit of $15 billion or 2.1 per cent of GDP in the year-ago period.
"The surplus in the current account in Q1 of 2020-21 was on account of a sharp contraction in the trade deficit to $10.0 billion due to steeper decline in merchandise imports relative to exports on a year-on-year basis," the RBI said. The current account balances, which represents the net of the country's export and imports of goods and services and also payments made to foreign investors or inflows from them, are considered as an important indicator of a country's external sector.
In a recent report, domestic ratings agency Icra had said that India's current account will swing to a surplus of $30 billion in FY21 or 1.2 per cent of GDP on a slowdown in imports during the pandemic, but added that it will be a "temporary" phenomenon. The RBI on Wednesday said net services receipts remained stable at $20.5 billion, as against $20.1 billion in the year-ago period, primarily on the back of net earnings from computer services.
Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $18.2 billion which is a decline of 8.7 per cent from their level a year ago, the RBI said. Net outgo from the primary income account, primarily reflecting net overseas investment income payments, increased to $7.7 billion from $6.3 billion a year ago, it said.
In the financial account, net foreign direct investment recorded outflow of $0.4 billion as against inflows of $14.0 billion in Q1 of 2019-20. Net foreign portfolio investment was $0.6 billion as compared to $4.8 billion in Q1 of 2019-20 as net purchases in the equity market were offset by net sales in the debt segment, it said.
With repayments exceeding fresh disbursals, external commercial borrowings to India recorded net outflow of $1.1 billion in Q1 of 2020-21, as against an inflow of $6.0 billion a year ago, the RBI said. Net inflow on account of non-resident deposits increased to $3 billion in the June quarter, as against $2.8 billion in Q1 of 2019-20, it said.
There was an accretion of $19.8 billion to the foreign exchange reserves (on a balance of payments basis) as compared to that of $14.0 billion in Q1 of 2019-20, the central bank said.