India's current account deficit widens to 1.1% of GDP in Q1 FY25

Current account deficit: India's current account deficit was at 1.1 per cent of GDP , or $9.7 billion, in the first quarter of FY25 compared with the same quarter last year, according to an RBI release. The RBI attributed this rise to a growing merchandise trade deficit during the period.

Trade Balance In Focus

Merchandise imports increased to $176.1 billion. There was negative export growth with the level shrinking to $111 billion from the previous year. Consequently, the overall trade deficit surged by 10 per cent. Service sectors registered modest growth, thus offsetting losses in the merchandise trade.

Prospects for Future

This fiscal year is likely to witness a breach of 1 per cent for the current account deficit from 0.7 per cent in the previous fiscal, although capital inflows mainly due to the intended integration of India in global indices are likely to ensure that the threshold of 2 per cent remains intact. Trade deficit breakout is persisting, indicating deep-seated problems in the trade balance as the services sector continues to be a solace to offset some of this pain.