India posts record current account surplus in June quarter

MUMBAI (Reuters) - India’s current account surplus rose to a record $19.8 billion in April-June as its trade deficit narrowed sharply, the Reserve Bank of India said on Wednesday.

FILE PHOTO: A cashier checks rupee notes inside a room at a fuel station in Ahmedabad, India, September 20, 2018. REUTERS/Amit Dave

The current account figure for the first quarter of the fiscal year compared with a surplus of $600 million in the Jan-March quarter, which was the country’s first surplus in 13 years.

The surplus stood at 3.9% of gross domestic product (GDP) in the latest quarter, compared with a deficit of $15 billion or 2.1% in the same period a year ago, RBI data showed.

The higher balance-to-GDP ratio is primarily due to sharp contractions in both the trade deficit and economic activity, said Rupa Rege Nitsure, chief economist at L&T Financial Services.

The country’s merchandise trade balance recorded a deficit of $10 billion in April-June, sharply lower than the deficit of $46.8 billion in the same quarter a year ago.

India’s economy contracted by 23.9% in the June quarter, far worse than economists had predicted, as sweeping coronavirus restrictions paralysed business and consumer activity. They are now predicting around a 10% contraction for the full year 2020/21.

Net services receipts remained stable, primarily on the back of net earnings from computer services, the RBI said.

Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $18.2 billion, a fall of 8.7% from the previous year.

Net foreign direct investments recorded an outflow of $400 million, as against inflows of $14.0 billion in same quarter previous year.

The balance of payments showed a surplus of $19.8 billion in the first quarter of 2020/21, compared with a surplus of $14 billion a year earlier.

“This may not sustain for very long as imports will start growing at the faster pace than exports once the economic engine becomes fully operational,” Nitsure said.

Reporting by Swati Bhat; Editing by Kim Coghill