By Siddhi Nayak
MUMBAI (Reuters) -India’s current account deficit widened less than expected in the October-December quarter, largely due to a buoyancy in services exports, central bank data released on Friday showed.
The current account deficit stood at $11.5 billion in the third quarter of fiscal year 2024-25, compared with $10.4 billion in the same quarter a year ago.
However, as a percentage of the country’s gross domestic product, the deficit was unchanged at 1.1% year over year.
Still, on both counts, that was lower than economists’ median forecast of $12 billion, or 1.3% of GDP, for the period, according to a Reuters poll.
The RBI said the deficit was a revised $16.7 billion, or 1.8% of GDP, in July-September due to an upward adjustment of customs data on merchandise imports.
“India’s CAD remains at comfortable levels aided largely by continued resilience in services exports,” said Aditi Gupta, economist at Bank of Baroda.
“Overall, we expect CAD to expand only marginally to 1.2%-1.5% of GDP in 2025-26.”
During the December quarter, India’s net services receipts rose to $51.2 billion from $45 billion a year ago, the data showed.
Services exports increased across major categories such as business services, computer services, transportation services and travel services, the RBI said.
Private transfer receipts, which are mainly remittances by Indians working overseas, rose to $35.1 billion from $30.6 billion a year ago.
India’s merchandise trade gap widened to $79.2 billion in October-December, from $71.6 billion in the year-ago period, amid uncertainty over U.S. President Donald Trump’s trade policy.
India is trying to strike a bilateral trade pact with the U.S. to avoid the wrath of its reciprocal tariffs that could be announced on April 2.
“Trade tariff hikes are likely to weigh on India’s current account dynamics even as strong services exports and lower oil prices (as favoured by Trump) may cap the impact, Kanika Pasricha, chief economic advisor at Union Bank of India, said.
The merchandise trade deficit narrowed to a more-than-three-year low of $14.05 billion in February as imports slipped.
Meanwhile, India’s balance of payments stood at a record deficit of $37.7 billion in the October-December quarter, compared with a surplus of $6 billion in the year-ago period, the RBI said.
The deficit was due to capital outflows, said Gaura Sen Gupta, India economist at IDFC FIRST Bank.
“We estimate the balance of payments to be in a deficit of around $10 billion to $15 billion for FY25.”
(Reporting by Siddhi Nayak; Editing by Mrigank Dhaniwala and Savio D’Souza)
