India’s current account improves as trade deficit shrinks

India’s current account deficit narrowed in the September quarter of the fiscal year as the trade deficit shrank, central bank data showed on Tuesday.

The current account deficit declined to 0.9 percent of gross domestic product in the second quarter of the fiscal year ending March 2020 from 2.9 percent in the same period a year ago.

On a quarterly basis, it shrank from 2.0 percent of GDP in the June quarter. The deficit measures the difference between the value of a country’s imported and exported goods and services.

“The contraction ... was primarily on account of a lower trade deficit at $38.1 billion as compared with $50.0 billion a year ago,” the Reserve Bank of India said.

The trade deficit stood at $12.12 billion in November compared with $16.67 billion a year earlier, trade ministry data shows.

The “trade deficit is lower primarily because imports have fallen at a faster rate than exports due to weak manufacturing activity and lower imports of raw materials and capital goods,” said Rupa Rege Nitsure, chief economist at L&T Financial Services.