India’s current account deficit widens to 1.1% of GDP at $9.7 bn in Q1FY25: RBI

Current Context: The Reserve Bank of India (RBI) released a report titled “India’s Balance of Payments Developments during Q1FY25” on September 30, 2024, detailing India’s current account deficit (CAD) for the first quarter of the fiscal year 2024-25 (Q1FY25).

• Here are the key points from the report:
• Current Account Deficit: The CAD widened to $9.7 billion, which is 1.1% of GDP, compared to $8.9 billion (1.0% of GDP) in Q1FY24 and a surplus of $4.6 billion (0.5% of GDP) in Q4FY24.
• Merchandise Trade Deficit: The increase in CAD was primarily due to a rise in the merchandise trade deficit, which grew to $65.1 billion in Q1FY25 from $56.7 billion in Q1FY24.
• Net Services Receipts: These increased to $39.7 billion from $35.1 billion a year ago, with significant contributions from computer services, business services, travel services, and transportation services.
• Private Transfer Receipts: Mainly representing remittances by Indians employed overseas, these rose to $29.5 billion from $27.1 billion in Q1FY24.
• Foreign Exchange Reserves: After financing the CAD, the net accretion to the forex reserves was $5.2 billion in Q1FY25, compared to $24.4 billion in Q1FY24.

Question:

1 As per the Reserve Bank of India (RBI)’s report titled “India’s Balance of Payments Developments during Q1FY25” What was India’s Current Account Deficit (CAD) in Q1FY25 as a percentage of GDP?

• A) 1.0%
• B) 1.2%
• C) 0.5%
• D) 1.1%

Answer: D) As per the Reserve Bank of India (RBI) report titled “India’s Balance of Payments Developments during Q1FY25”, The CAD widened to $9.7 billion, which is 1.1% of GDP, compared to $8.9 billion (1.0% of GDP) in Q1FY24 and a surplus of $4.6 billion (0.5% of GDP) in Q4FY24.