India’s increase of Trade deficit worries Q1 CAD

current account deficit

As RBI reports on Friday , Current Account deficit in first quarter of FY’18 -19 hit $15.8 billion resulting in GDP marginal declination to 2.4% of the GDP compared with 2.5% of Q1 in 2017-2018. CAD stood $15bn in last year Q1. India’s CAD widened with increase of $0.8bn when compared to last year. The reason behind “The widening is due to account of higher trade deficit at $45.7 billion vs $41.9 bn an year ago “says Central bank.

On other hand, Net services receipts increased to 2.1% due to rise in net earnings from software and financial services. Mainly Remittances by Indians employed overseas increased to 16.9 percent from an year ago. Net foreign investment in Q1 FY’18 stood $9.7 billion.

Foreign exchange reserves depleted in Q1 2018-2019 to $11.3bn against $11.4bn in Q1 of 2017 says RBI .
Rajesh Mokashi CEO of CARE Ratings Ltd stated CAD has to be viewed in several quarters not just one .In one Quarter it may increase due to temporary distractions so country need not be worried he added.

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