Tuesday , June 18 2024

Another good news on the economic front: India's current account deficit reduced by 1%

Another relief news has come out on Bharti's economic front. The country's current account deficit is expected to reduce. Improvements on the trade front and especially growth in exports are helping the country reduce its current account deficit. For this reason, economists estimate that India's current account deficit may remain below 1% of GDP in the current financial year.

Best data in 9 months

According to the data available so far, the country's trade deficit has declined during the current financial year. India's merchandise trade deficit in January stood at $17.5 billion. Which is the lowest in nine months. Earlier in the month of December, India's merchandise trade deficit was 19.8 billion dollars. The service sector has made the most important contribution in reducing this. The services sector surplus increased to $16.8 billion in January.

Thus the trade deficit has reduced

During the current financial year, only the figures for February and March are yet to be released. That means the figures for the first 10 months are already clear. The country's trade deficit from April 2023 to January 2024 stood at $206 billion. It was $229 billion in the first 10 months of the last financial year. During this period, net exports of the services sector increased to $138 billion from $117 billion a year ago.

Relief is also being given in case of foreign investment. Both foreign direct investment and foreign portfolio investment have increased in the current financial year. Although FDI inflows were seen in the September quarter, FDI inflows were good in the months of October and November during the December quarter. Overall FPI is also positive. However, good data on higher foreign investments may provide some support to the rupee as the central bank may use this opportunity to focus on strengthening foreign exchange reserves which stood at $617 billion as of February 9.

Due to this figure, all experts are estimating the current account deficit to remain under control. Goldman Sachs had said in January that India's current account deficit is expected to remain low this year. HDFC Bank estimates that CAD will remain below 1% of GDP.