Import bill bleeds on high energy prices, higher services surplus and remittances provide some cushion

Spiraling international commodity prices on the back of the Russia-Ukraine war yanked wider open India’s goods trade deficit in the first quarter of the current fiscal. As a result, the current account deficit (CAD) rose to a 15-quarter high of 2.8% of gross domestic product (GDP), from 1.5% in the fourth quarter of fiscal 2022. The CAD was in surplus at 0.9% of GDP in the year-ago quarter.

Higher surplus in services and the income account (owing to increased remittances) kept the deficit from deteriorating further.

Under the financial account, foreign direct investments (FDI) and foreign portfolio investments (FPI) stayed somewhat stable on-quarter. A spurt in other investments (mainly banking capital) leding to a surplus on this account. That not only covered the shortfall in the current account but also led to a small accretion in forex reserves.