India's Current Account Deficit: An In-depth Analysis

India's current account deficit (CAD) rose to USD 11.5 billion in the December quarter, attributed to a higher trade deficit. Despite moderation from USD 16.7 billion in the previous quarter, merchandise trade deficits and foreign direct investment outflows were notable contributors, according to new RBI data.

India's current account deficit (CAD) has inched up to USD 11.5 billion, primarily due to an increased trade deficit, as revealed by RBI data. This figure represents 1.1% of the country's GDP for the December quarter, marking a rise from USD 10.4 billion recorded in the corresponding period last year.

The December quarter of 2024-25 saw a CAD moderation from the preceding period's USD 16.7 billion. Despite this moderation, the merchandise trade deficit climbed to USD 79.2 billion, up from USD 71.6 billion a year ago. Additionally, net services receipts increased to USD 51.2 billion.

Net outflows recorded within foreign direct investment and portfolio investments further influenced the CAD. The Reserve Bank of India also reported a depletion in foreign exchange reserves by USD 37.7 billion, highlighting ongoing economic challenges amidst fluctuating global trade dynamics.