CAD down to 0.7% of GDP in 2016-17

The current account deficit (CAD) narrowed in 2016-17 to 0.7 percent of GDP, down from 1.1 percent of GDP the previous year, led by the sharp contraction in trade deficit which more than outweighed the decline in net invisibles said the mid-year survey of the economy released on Friday.

CAD is the difference in the value of goods and services exported and imported. With both net services and net private transfers declining, net invisibles receipts at $97.1 billion fell by 10.0 per cent in FY 2017. Subdued activity in source countries, particularly in the Gulf region, reduced the flow of net remittances to India substantially, from $63.1 billion in 2015-16 to $56.6 billion in 2016-17 said the Survey.

Export growth turned positive after a gap of two years and imports contracted marginally, so that India’s trade deficit narrowed to 5 percent of GDP ($112.4 billion) in FY 2017 as compared to 6.2 per cent ($130.1 billion) in the previous  year.

After many quarters, volume growth in exports remained consistently positive since February 2016, while import volume growth became positive in October 2016.