Mumbai: Current Account Deficit (CAD) fell sharply to its lowest level in a year at USD 1.3 billion or 0.2 percent of GDP in the fourth quarter of 2014-15, as trade gap narrowed on lower oil prices and robust foreign inflows.
The CAD for the entire fiscal ended March 31, 2015 also narrowed to 1.3 percent of the country's Gross Domestic Product, the Reserve Bank said Wednesday.
"On a quarter-on-quarter basis, CAD narrowed sharply to USD 1.3 billion (0.2 percent of GDP) in fourth quarter of financial year 2014-15 from USD 8.3 billion (1.6 percent of GDP) in the third quarter," RBI said.
A key measurement of a country's trade, the CAD is the amount by which the value of goods and services imported by it exceeds the value of goods and services exported in a period.
"The reduction in CAD in fourth quarter was primarily on account of lower trade deficit as net earnings through services and primary income (profit, dividend and interest) witnessed a decline in quarter-on-quarter terms though secondary income recorded a marginal increase of 0.4 percent," the central bank said.
On year-on-year basis, CAD in the fourth quarter was a shade higher than USD 1.2 billion (0.2 percent of GDP) in the same quarter of financial year 2013-14.
For the full fiscal 2014-15, the CAD shrank to USD 27.5 billion, or 1.3 percent of GDP, from USD 32.4 billion or 1.7 percent of GDP a year ago, RBI said.
The central bank also said it added a whopping USD 61.4 billion to the foreign exchange reserves in 2014-15 compared to USD 15.5 billion in the previous fiscal.
At the end of March, 2015, the level of foreign exchange reserves stood at USD 341.6 billion.
However, in year-over-year terms, the trade deficit in the fourth quarter widened marginally as exports registered a larger decline (15.4 percent) than imports (10.4 percent).
"In financial year 2014-15, trade deficit narrowed to USD 144.2 billion from USD 147.6 billion last year," the RBI data showed.
Lower CAD, on the back of contraction in trade deficit and marginal improvement in the net invisible earnings, along with a sizable increase in net financial flows enabled a large build-up of reserves, the central bank said.
Domestic rating agency Care Ratings said the CAD could remain range-bound going ahead and pegged it at 1.5-2.0 percent of GDP for the current fiscal 2015-16.
