CAD widens to 1.9% of GDP in Q4FY18 on higher imports
Higher software exports and remittances have failed to salvage the current account deficit which rose to 1.4% of GDP pushing the import bill from 0.4% of GDP a year ago on account of rising crude and commodity prices.
Current account deficit(CAD), the excess of a Country’s imports over exports rose to $ 13.0 billion or 1.9 per cent of GDP in Q4 of 2017-18 , up from $ 2.6 billion or 0.4 per cent of GDP in Q4 of 2016 -17, but moderated marginally from $ 13.7 billion or 2.1 per cent of GDP in the Q3 of 2017-18, according to the preliminary numbers released by the Reserve Bank of India.
RBI said that the increase in CAD was mainly due to widening of trade deficit which rose by 405 to $41.6 billion during the quarter from $29.7 billion, a year ago. Crude oil accounts for a fourth of India’s merchandise imports and crude prices increased 5 per cent during the quarter to touch $68.4 per barrel by end of March.
“The size of the current account deficit in Q4 FY2018 nearly rivalled the full year deficit recorded in FY2017, underscoring the impact that rising commodity prices have on the external balances of net importers such as India” said Aditi Nayar, Principal Economist at ratings firm ICRA.