Q1 CAD NARROWS TO 1.7% OF GDP VERSUS 4.8% YoY

The deficit stood at 4.8% of GDP in the year-ago period

Rise in exports and a decline in imports helped sharply narrow the country’s current account deficit (CAD) to $7.8 billion in the April-June quarter of 2014-15 from $21.8 billion in the year-ago period, according to the Reserve Bank of India. As a percentage of GDP, the CAD was lower at 1.7 per cent in the reporting period as against 4.8 per cent in same period last year.

However, the CAD in the April-June quarter was higher than $1.2 billion (0.2 per cent of GDP) in the preceding January-March quarter, the RBI said.

CAD arises when a country’s total imports of goods, services and transfers are greater than exports. A higher CAD weakens the domestic currency. With India importing almost 80 per cent of its oil requirements, a weak currency could have an inflationary impact.

There was a net accretion of $11.2 billion to India’s foreign exchange reserves in the reporting period as against a drawdown of $0.3 billion in the year-ago period.