India records a current account surplus after 10 quarters

After 10 quarters, India recorded a current account surplus of $5.7 billion in Q4 FY24 (0.6% of the GDP). However, for the full financial year 2023-24, the country clocked a trade deficit which more-than-halved to a seven-year low of $67 billion.

The release attributes the surplus to the rising services exports and growing remittances. Services exports grew by 4.1 % year-over-year aided by rising exports of software, travel, and business services. The net services receipt contributed to the surplus in the current account balance during the fourth quarter.

Remittances by Indians employed abroad also grew by 11.9% year-over-year, amounting to $32.0 billion.

The quarterly current account deficit in the third quarter of the same financial year stood at a negative $8.7 billion, making up 1% of the GDP.

The Reserve Bank of India released the balance of payments data for the fourth quarter of the financial year 2023-24 for the period between January and March this year, yesterday.

This is primarily due to a lower merchandise trade deficit which stood at $50.9 billion in Q4 2023-24, than $52.6 billion a year ago.

The net primary income deficit, reflecting payments of investment income, widened to $14.8 billion from $12.6 billion a year ago.

The release also highlighted a reduction in net foreign direct investment flows to $ 2 billion Q4 2023-24 in comparison with the results of the same quarter a year ago which stood at $6.4 billion.

Foreign portfolio investment recorded a net inflow of $11.4 billion in Q4 2023-24 considerably higher than the fourth quarter inflows of the year 2022-23.

India's net external commercial borrowings increased by 52.94%, reaching $2.6 billion in Q4 2023-24, compared to $1.7 billion in the same quarter the previous year.

Net invisibles receipt was higher during 2023-24 than a year ago, primarily on account of services and transfers.

During 2023-24, portfolio investment recorded a net inflow of $44.1 billion as against an outflow of $5.2 billion a year ago.

Net FDI inflow was $9.8 billion during 2023-24 as compared with $28.0 billion in 2022-23.

The release also indicated an increase in the forex reserves.

“On a balance of payments basis (i.e., excluding valuation effects), foreign exchange reserves increased by $63.7 billion during 2023-24 as against a depletion of $9.1 billion during 2022-23,” the release stated. “Foreign exchange reserves in nominal terms (including valuation effects) increased by $68.0 billion during 2023-24 as against a decrease of $28.9 billion in the preceding year,” added the RBI.

This reflects a valuation gain that amounted to $4.3 billion during 2023-24 as against a valuation loss of $19.7 billion during 2022-23, mainly reflecting the gold prices.