Q2 CAD plunges to $5.2 billion versus $21 billion YoY

NEW DELHI: Current Account Deficit (CAD) for the second quarter of the current financial year plunged to $5.2 billion versus $21 billion year-on-year, on the back of turnaround in exports and decline in gold imports. The figure implies that CAD was at 1.2% of GDP versus 5% of GDP year-on-year.

The Reserve Bank of India (RBI) reported that the capital and financial account surplus was at $5 billion versus $20.8 billion year-on-year. The foreign exchange drawdown stood at $10.4 billion versus $0.2 billion year-on-year. The net inflow of NRI deposits surged to $8.3 billion versus $2.8 billion year-on-year.

The trade deficit for the time period from July to September was reported at $33.3 billion versus $47.8 billion year-on-year. According to RBI, textiles, leather products, chemicals pushed up merchandise exports. "On a BoP basis, merchandise exports increased by 11.9 per cent to $81.2 billion in Q2 of 2013-14 on the back of significant growth especially in the exports of textile and textile products, leather & leather products and chemicals," said the bank.

Net invisibles during Q2 of 2013-14 improved, essentially reflecting a rise in net services exports. Net services at $18.4 billion recorded a growth of 12.5 per cent in Q2 of 2013-14 (y-o-y) mainly on account of computer services.

"Contraction in the trade deficit coupled with a rise in net invisibles receipts resulted in a reduction of the CAD to $26.9 billion (3.1 per cent of GDP) in H1 of 2013-14 from $37.9 billion (4.5 per cent of GDP) in H1 of 2012-13," RBI said in a statement.

While foreign direct investment recorded net inflows of $6.9 billion in Q2 of 2013-14, net portfolio investment registered an outflow of $6.6 billionin the wake of indication given by US Federal Reserve about the tapering of its quantitative easing programme.

There was a marginal net outflow of $0.8 billion under equities while the debt component of net FII flows recorded a higher outflow of $5.7 billion.