India reports quarterly current account surplus for first time since 2006-07

India reported surplus in current account for the first time in Jan-Mar quarter since 2006-07 on account of trade deficit amid slow consumption, Covid-19 pandemic and increase in net invisible receipts. According to the data released by Reserve Bank of India on Tuesday, the country posted surplus in current account at 0.1% or $600 million of the gross domestic product (GDP) as compared with a deficit of 0.7% of GDP during the same period of previous year i. e. 2018-19. While the trade deficit was recorded at $35 billion, the increase in net invisible receipts was registered at $35.6 billion, the data said.

According to the apex bank, private transfer receipts, mainly representing remittances by Indians employed overseas, increased to US$ 20.6 billion, up by 14.8 per cent from their level a year ago. Meanwhile, net foreign direct investment or FDI stood at US$ 12.0 billion in Jan-Mar, higher than US$ 6.4 billion in the same quarter of FY19.

Furthermore, foreign portfolio investment (FPI) decreased by US$ 13.7 billion in the last quarter of FY20 as against an increase of US$ 9.4 billion in Q4 of 2018-19 on account of net sales in both the debt and equity markets.

"We now expect FY21 to see current account being in positive at 0.5% of GDP led by huge terms of trade gains from slump in oil imports while core import demand also remains bleak," said Madhavi Arora, chief economist with Edelweiss.

"The capital account front will be contingent on evolving global risk appetite as markets reassess global growth concerns and other idiosyncrasies, albeit with global liquidity acting as a backstop. Overall, FY21 BoP will likely remain in comfortable surplus of ~$60bn," she further added.

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It is to be noted that the CAD for Oct-Dec of FY 20 was revised to $2.6 billion or 0.4% of GDP from $1.4 billion reported earlier, as per the central bank data.