India’s FY24 CAD declines to 0.7% of GDP from 2% in FY23; records surplus of 0.6% in Q4: RBI

Current Context: The Reserve Bank of India reported positive developments for India's external finances on June 24th, 2024.

• The current account deficit (CAD) narrowed significantly to 0.7% of GDP in FY24 compared to 2% the prior year, thanks to a lower merchandise trade gap.
• Even better, the last quarter (Q4 FY24) saw a current account surplus of 0.6% of GDP, likely driven by strong services exports.
• Additionally, foreign portfolio investment turned positive with a net inflow of $44.1 billion in FY24, while net foreign direct investment (FDI) inflow declined compared to the previous year.

Question:

1 According to recent data by RBI, What was the current account deficit (CAD) as a percentage of GDP for India in FY24?

• A) 0.7%
• B) 1.0%
• C) 2.0%
• D) 3.5%

Answer: A) The current account deficit (CAD) narrowed significantly to 0.7% of GDP in FY24 compared to 2% the prior year, thanks to a lower merchandise trade gap.