Strong services trade surplus and remittances primary reason

India’s current account deficit (CAD) narrowed to $10.5 billion (1.2% of GDP) in the third quarter of fiscal 2024, from $11.4 billion (1.3% of GDP) in the second quarter. On year, too, the deficit narrowed. The benign CAD deficit came in despite wider deficits in the merchandise trade account and primary income acount, which mainly includes net income from investments abroad. A higher combined surplus in services trade and secondary income – which mainly includes remittances – offset the impact of wider merchandise-trade and primary-income account deficits.

CAD funding was comfortable, driven by a net increase (8.3% on-quarter) in financial flows during the third quarter, primarily driven by an uptick in both direct and portfolio investments and leading to net accretion in foreign exchange reserves .