Mon Sep 30 17:37:14 UTC 2024: ## India’s Current Account Deficit Widens in Q1 2024-25
**Mumbai, India** – India’s current account deficit (CAD) widened marginally to $9.7 billion (1.1% of GDP) in the first quarter of the fiscal year 2024-25, according to the Reserve Bank of India (RBI). This is an increase from $8.9 billion (1% of GDP) in the same period last year, primarily driven by a surge in imports.
The widening of the CAD was mainly due to a rise in the merchandise trade deficit, which increased to US$65.1 billion in Q1 2024-25 from US$56.7 billion in Q1 2023-24. However, net services receipts also saw an increase year-on-year, reaching $39.7 billion in Q1 2024-25 from $35.1 billion in the previous year. This rise was attributed to increased services exports across various sectors, including computer services, business services, travel, and transportation.
Private transfer receipts, primarily comprising remittances from Indians working overseas, also rose to $29.5 billion in Q1 2024-25 from $27.1 billion in the same period last year.
Despite the increase in services and remittances, the widening merchandise trade deficit resulted in a lower net accretion to foreign exchange reserves in Q1 2024-25, reaching only $5.2 billion compared to $24.4 billion in the same quarter last year.
Aditi Nayar, chief economist and head of research and outreach at ICRA Ltd, anticipates that the current account deficit will be further impacted by a significant increase in gold imports in August 2024 following a reduction in customs duty. Nayar expects this to potentially push the deficit to nearly 2% of GDP for the quarter. However, with gold imports unlikely to sustain this surge, she anticipates a gradual easing of the monthly merchandise trade deficit and expects India’s CAD to average between 1.1% and 1.2% of GDP in FY25.
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