India Balance of Payments

India's Current account deficit (CAD) soars to 2%of GDP during Oct-Dec'17

Published quarterly by Reserve Bank of India. Updated until the October-December 2017 quarter. (Published on March 16th, 2018)

Recent Data Trend

India's current account deficit (CAD) worsened to USD 13.5 billion (2% of GDP) during Oct-Dec'17 (Q3 2017-18) from a level of USD 8 billion (1.4% of GDP) in the corresponding quarter a year ago. The widening of CAD was on account of an increase in imports by 19% year-on-year (YoY) during Q3 2017-18. The surge in crude oil prices increased the import bill for India. In the concerned period, the global crude oil price rose by 25% YoY.

India's trade deficit widened to USD 44.1 billion during Q3 2017-18 from a level of USD 33.3 billion in the year-ago period. Despite, the soaring CAD, the economy received an accretion of USD 9.4 billion in forex reserves due to a stronger capital account surplus. This was in contrast to the deficit of 1.2 billion in the year-ago period.

The capital and financial account surplus rose to USD 12.6 billion in Q3 2017-18 from USD 7.3 billion in Q3 2016-17, supported by stronger portfolio investment inflows worth USD 5.3 billion.

We believe, with the CAD soaring and risks of fiscal slippage breathing (as fiscal deficit reached 4% of GDP by end Jan'18), the rupee is likely to witness a downward pressure. The combination of soaring CAD and a high fiscal deficit will bring in inflationary pressures and likely weigh down on the rupee, which has already lost 1.4% against USD since the beginning of 2018.

Brief Overview

The Balance of Payments (BoP) records all economic transactions between residents of a country and rest of the world. The BoP account consists of Current account, Capital account, and Financial Account. 

The current account includes flows of goods, services, primary income, and secondary income between residents and non-residents and thus constitutes an important segment of BoP. The primary income account reflects the amounts payable and receivable in return for providing temporary use of labor, financial resources, or non-produced non-financial assets (natural resources). The secondary income account shows redistribution of income between resident and non-residents, i.e when resources for current purposes are provided without economic value being exchanged in return (transfers).

On the other hand, the capital account comprises credit and debit transactions under non-produced non-financial assets and capital transfers between residents and non-residents. Thus, acquisitions and disposals of non-produced non-financial assets, such as land sold to embassies and sales of leases and licenses, as well as transfers which are capital in nature, are recorded under this account.

The financial account reflects net acquisition and disposal of financial assets and liabilities during a period. Further, it shows how the net lending to or borrowing from the rest of the world has occurred. Conversely, it shows how the current account surplus is used or the current account deficit is financed.

The Reserve Bank of India (RBI) has been compiling and publishing Balance of Payments (BoP) data for India since 1948. Since then, several developments have taken place both globally and domestically.

Considering these developments and to bring out a comprehensive Balance of Payments Manual documenting current practices, procedures of compilation, presentation, coverage and sources of data for India’s balance of payments and assess them in relation to international best practices, India has shifted from BPM 5,1993 manual to BPM6,2009 method of accounting and classifying the data.

The above data has been compiled as per the latest IMF's BPM6 standard of classification. For further details visit the official website.

Next Release Date: 2nd week of June 2018.