India’s Current Account Surplus Reaches $5.7 Billion in Q4 2024
New Delhi, India – India has achieved a current account surplus of USD 5.7 billion, which is 0.6% of its GDP, in the fourth quarter of fiscal year 2024. This is a significant improvement from the USD 8.7 billion deficit (1.0% of GDP) in the third quarter and the USD 1.3 billion deficit (0.2% of GDP) in the same quarter last year.
Factors Contributing to the Improvement
The improvement is due to a narrowing merchandise trade deficit, an increased services trade surplus, and a rise in remittances. Financial flows also showed considerable improvement, resulting in a substantial foreign exchange reserve increase of USD 30.8 billion during the fourth quarter, the highest in the past ten quarters. As of June 14, India’s forex reserves reached USD 652.9 billion.
Trade and Financial Flows
The trade deficit narrowed to 0.9% of GDP from 2.7% in the previous quarter, driven by a reduction in the merchandise trade deficit to 5.4% of GDP from 7.7%. The services trade surplus slightly moderated to 4.5% from 5.0%. The primary income account deficit widened marginally to 1.6% of GDP from 1.4%, while the secondary income account surplus declined to 3.0% from 3.2%. Net financial inflows increased to 2.6% of GDP from 1.7%, contributing to the sharp rise in forex reserves.
Annual Performance
For fiscal 2024, India’s current account deficit (CAD) narrowed sharply to USD 23.2 billion (0.7% of GDP) from USD 67.0 billion (2.0% of GDP) in fiscal 2023. The goods trade deficit decreased to USD 242.1 billion from USD 265.2 billion, driven by a sharper decline in imports (-5.2%) compared to exports (-3.2%). The services trade surplus rose to USD 162.7 billion from USD 143.3 billion, with notable improvements in sectors like telecom, computer, and information services, and professional and management consulting services.
Foreign Direct Investment (FDI)
Despite continuous inward FDI, the rise in outward FDI led to a reduction in net FDI inflows. Net FDI inflow stood at USD 2.0 billion in the fourth quarter, down from USD 3.9 billion in the third quarter and USD 6.4 billion in the same period last year. FDI inflows increased to USD 19.8 billion during the fourth quarter, but this was offset by accelerated FDI outflows, which rose to USD 17.9 billion from USD 10.7 billion.
Other Investments
Other investments, including non-resident Indian (NRI) deposits, external commercial borrowings (ECBs), other loans, and trade credit, saw a significant jump to USD 14.28 billion in the fourth quarter from USD 1.22 billion in the previous quarter. This was bolstered by a rise in net inflow under NRI deposits to USD 5.4 billion from USD 3.9 billion, and a shift in ECBs to an inflow of USD 2.6 billion from an outflow of USD 2.7 billion.
Forex Reserves and Currency
Forex reserves surged by USD 30.8 billion in the fourth quarter, compared to a USD 6.0 billion increase in the third quarter. As of the end of March 2024, the reserves stood at USD 642.63 billion. The rupee appreciated by 0.27% during the quarter, averaging 83.02 per US dollar, in contrast to a 0.7% depreciation in the previous quarter.
A country’s current account represents its imports and exports of goods and services, payments made to foreign investors, and transfers such as foreign aid.
