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India Current Account Swings To Surplus In June Quarter

The current account surplus stood at $6.5 billion or 0.9% of GDP compared to $19.1 billion in the same quarter a year ago, which was a record high.

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India's current account balance moved into a surplus in the three months from April to June largely because of a contraction in the trade deficit, the Reserve Bank of India said in a release on Thursday.

Analysts predicted, however, the surplus was unlikely to be sustained for the fiscal year to March 2022 as a whole.

The current account surplus stood at $6.5 billion or 0.9% of GDP compared to $19.1 billion in the same quarter a year ago, which was a record high. In the preceding January-March quarter the current account was in a deficit of $8.1 billion.

"The surplus in the current account in Q1 2021/22 was primarily on account of contraction in the trade deficit to $30.7 billion from $41.7 billion in the preceding quarter, and an increase in net services receipts," RBI said in the release.

India had moved to a current account surplus for the first time in over a decade in the January-March quarter of 2020.

"Current account strength was a function of strong performance in exports, on the coattails of firm global growth and pick up in manufactured goods shipments," Radhika Rao, economist with DBS Bank, said.

Rao and other economists said it could be hard to maintain the surplus as high global commodity prices add to import costs and exports may also slow.

For the full year, the current account deficit should still be "at manageable levels below -1% of GDP," she said.

Indranil Pan, chief economist at Yes Bank, said global growth in the quarter to the end of June "was relatively outsized on the higher side".

"I think that we will have some moderation and normalisation of growth, which also means that the export sector will normalise too," Pan said.

RBI said net services receipts rose year-on-year, driven by the robust performance of net exports of computer and business services, while private transfer receipts, which are mainly remittances by overseas Indians, rose by 14.8%.

The country's balance of payments was at a surplus of $31.9 billion in the first quarter of the financial year 2021/22, compared with a surplus of $19.8 billion a year earlier.

(Reuters)