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In FY22, India’s current Account Deficit (CAD) was 1.2%

According to data from the RBI, India’s current account deficit (CAD) for the three months ending March 22 decreased sequentially to 1.5% of GDP as remittances from Indians living abroad as well as software exports increased and the outflow from dividend and interest payouts decreased.

Significantly, the CAD came in at 1.2% of GDP for FY’22, which was better than the market’s prediction of up to 1.5% of GDP.

According to the preliminary estimates made public by the Reserve Bank of India on Wednesday, India’s CAD declined from $ 22.2 billion (2.6% of GDP) in Q3’2021-22 to $ 13.4 billion (1.5% of GDP) in Q4’2021-22. However, due to a greater increase in the trade deficit, it was greater than $8.1 billion (1.0% of GDP) in Q4’2020–21.

However, a significant portion of the “Invisibles,” which reflects services and investment revenue flows, performed better both sequentially and yearly. According to a report from the RBI, net services receipts increased both sequentially and y-o-y as a result of an increase in net earnings from computer and business services.

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Private transfer receipts rose to $ 23.7 billion, up 13.4% from their level a year ago, primarily due to remittances from Indians working abroad. The primary income account’s net outflow declined sequentially and year over year, with the majority of it representing net income payments on foreign investments.

The current account balance for the entire fiscal year showed a deficit of 1.2% of GDP in 2021–2022, compared to a surplus of 0.9% in 2020–2021, as the trade deficit increased to $189.5 billion from $102.2 billion the previous year. But because to the rise in oil and commodity prices during the year, the majority of market analysts had predicted stronger CAD for the fiscal.

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Even though net income outgo was higher than a year ago, net invisible receipts were higher in 2021–22 as a result of an increase in net service exports and net private transfer receipts. From $87.3 billion in FY21 to $47.5 billion in FY22, the overall balance of payments surplus practically halved.

According to information on the sources of Variation in Foreign Exchange Reserves in India during 2021–22 released by the RBI on Friday, on a balance of payments basis (i.e., excluding valuation effects), foreign exchange reserves increased by $ 47.5 billion during 2021–22 as opposed to $ 87.3 billion during 2020–21. In nominal terms (including value effects), the amount of foreign exchange reserves increased by $30.3 billion in 2021–2022 compared to $99,2 billion in 2020–2021.

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