Yet again, India’s Current Account Deficit is a mere 10 bn in the quarter (Dec 2023), less than levels more than a decade back, and less than 2017-18 too.
Why net of gold? It’s not really a current account import – it’s a financial investment for the most part so it’s a “financial account” item, IMO. The gold is privately held, but that’s like an investment in shares from India by private individuals.
The trade deficit has widened:
But that’s offset by a rise in remittances (to $29bn!)
And a rise in software exports:
Both FPI and FDI went up in the quarter, $12bn and $4bn respectively. Not much, but it offset more than required.
Overall, RBI reserves went up $6bn because it bought the excess. It’s bought $33bn in the first three quarters of this year! (Note: If it hadn’t, the rupee would have appreciated).
Deepak Shenoy’s view: This is a solidly stable print. We will be net importers for a while longer, but the “net of gold” number is $3bn SURPLUS and means that import substitution mechanisms are working; we had lost the plot in 2021-22 but it’s starting to come back slowly. The world is getting insular, so expect a lot more local protectionist movements to deny us what we do best: intangible exports. And in that context, a focus on domestic manufacturing (“Make for India”) is a good bet.
