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India recorded Current Account Deficit of $1.7 billion in Q3FY21: RBI report

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current account deficit in DecemberAs per the RBI’s report “Developments in India’s Balance of Payments during the Third Quarter (October-December) of 2020-21(Q3FY21)” on March 31, 2021, India has recorded a current account balance deficit of $1.7 billion(i.e. 0.2% of Gross Domestic Product(GDP)) in Q3FY21 due to the COVID-19’s impact on trade.

  • The current account stood at a surplus of $15.1 billion and $19 billion in the first two quarters (Q1 & Q2) of FY21.
  • India had a deficit in the current account of about $2.6 billion(i.e.0.4% of GDP) in the Q3FY20.
  • RBI is expecting the size of the current account deficit to enlarge to $5-7 billion for Q4FY21 with an aggregate current account surplus of $25-27 billion for FY21.

Key points about the RBI’s report for Q3FY21:

  • The Merchandise trade deficit: It was increased to $34.5 billion from $14.8 billion in Q2FY21.
  • Net services receipts: It was increased to $23.6 billion.
  • Net outgo on the primary income account: (primarily payments of investment income) It was increased to $10.1 billion from $7.4 billion in FY20.
  • Private transfer receipts :( especially remittances by Indians employed overseas) declined by 1.5% to $20.7 billion in the Q3.
  • Net foreign direct investment(FDI):  It was about $17 billion, compared with $9.7 billion in the Q3FY20.
  • Net foreign portfolio investment (FPI): It was $21.2 billion as compared with $7.8 billion in Q3FY20
  • Foreign exchange reserves: It was hiked to $32.5 billion as compared to $21.6 billion in Q3FY20.

About Balance of payments:

i.It is a systematic statement of all economic transactions of the country with the rest of the world during a specific period.

ii.Components of BoP: Current account, Capital account and Errors and Omissions along with changes in Foreign Exchange Reserves.

iii.Current account: It measures the inflow and outflow of goods, services, investment incomes and transfer payments.

  • Current account deficit: It arises when the value of imports is greater than the value of exports.
  • Current account surplus: It arises when the value of imports is less than the value of exports.

iv.Capital Account: It shows the capital expenditure and income of the country.

Recent Related News:

RBI stated that Foreign portfolio investors(FPIs) pumped inflows into equities in India have made the highest record of $36 billion in FY21 up to March 10, which is the highest one since FY13. Foreign direct investment (FDI) inflows also jumped to $44 billion in FY21 (till January 2021), from $36.3 billion a year ago.

About Reserve Bank of India (RBI):

Establishment – 1st April 1935
Headquarters – Mumbai, Maharashtra
Governor – Shaktikanta Das