The Reserve Bank of India (RBI) has said that India's current account surplus increased to $19.8 billion or 3.9 percent of GDP in Q1 (April-June) of FY21. It noted that the surplus in the current account in Q1FY21 was on account of a sharp contraction in the trade deficit to $10.0 billion due to steeper decline in merchandise imports relative to exports on a year-on-year basis. The current account surplus stood at $0.6 billion or 0.1 percent of GDP in the March quarter while there was a current account deficit of $15 billion or 2.1 percent of GDP in the year-ago period. The current account balances, which represents the net of the country's export and import of goods and services and also payments made to foreign investors or inflows from them, are considered as an important indicator of a country's external sector.
According to the central bank, net services receipts remained stable at $20.5 billion, as against $20.1 billion in the year-ago period, primarily on the back of net earnings from computer services. Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $18.2 billion which is a decline of 8.7 percent from their level a year ago. Net outgo from the primary income account, primarily reflecting net overseas investment income payments, increased to $7.7 billion from $6.3 billion a year ago.
RBI further said in the financial account, net foreign direct investment recorded outflow of $0.4 billion as against inflows of $14.0 billion in Q1 of 2019-20. Net foreign portfolio investment was $0.6 billion as compared to $4.8 billion in Q1 of 2019-20 as net purchases in the equity market were offset by net sales in the debt segment. With repayments exceeding fresh disbursals, external commercial borrowings to India recorded net outflow of $1.1 billion in Q1 of 2020-21, as against an inflow of $6.0 billion a year ago. Net inflow on account of non-resident deposits increased to $3 billion in the June quarter, as against $2.8 billion in Q1 of 2019-20.