India posts $2 bn current account deficit in May as trade gap widens

Net merchandise trade deficit widened in May to $27.9 bn from 

$22.6 bn a year ago

Informist

New Delhi

India's current account recorded a deficit of $2 billion in May, compared with a surplus of $0.7 billion a year ago, due to a wider merchandise trade deficit, data released by the Reserve Bank of India (RBI) on Wednesday showed. The current account posted a surplus of $4.7 billion in April. The RBI started releasing monthly data on India's balance of payments last month.  

India's net merchandise trade deficit widened in May to $27.9 billion from $22.6 billion a year ago. The net services trade surplus slipped marginally to $15.7 billion in May from $15.8 billion a year ago. However, net transfers jumped 29.5% on year in May to $13.6 billion. 

India's overall balance of payments recorded a deficit of $4.4 billion in May, compared with a surplus of $4.4 million a year ago. The capital account recorded a deficit of $2.4 billion in May, compared with a surplus of $3.7 billion a year ago, primarily due to outflows from foreign portfolio investment. 

Net foreign portfolio investment outflows were $4.7 billion in May, while net foreign direct investment outflows were $100 million. External commercial borrowings fell to $100 million in May, compared with $2.4 billion a year ago. 

In the first two months of the financial year, India's current account recorded a surplus of $2.8 billion, compared with a deficit of $4.1 billion in the corresponding period last year. This surplus was driven by a higher services trade surplus and a jump in net transfers. Services trade surplus in April-May rose to $34.3 billion from $31.7 billion a year ago, while net transfers rose to $29.6 billion. 

The capital account recorded a deficit of $13.8 billion in April-May, and the overall balance of payments recorded a deficit of $11 billion. In the March quarter, India's current account surplus fell to $7.1 billion from $13.7 billion a year ago.