MUMBAI: India’s current account deficit shrank more than expected in the October-December quarter on the back of a narrower goods trade deficit alongside robust services exports and remittances, data from the Reserve Bank of India (RBI) showed on Friday.

In absolute terms, the current account deficit was $18.2 billion in the third quarter of fiscal year 2022/23 compared with $22.2 billion last year. As a percentage of GDP it stood at 2.2% in the quarter.

The current account deficit for the preceding, July-September, quarter was revised downwards to $30.9 billion or 3.7% of GDP from $36.4 billion or 4.4% earlier due to downward adjustment in customs data, the RBI said.

The goods trade deficit in the December quarter narrowed to $72.7 billion compared with $78.3 billion in the preceding quarter, the central bank said.

India’s forex reserves rise to over eight-month high, stand at $578.78bn

“With a considerable compression in the average trade deficit in Jan-Feb 2023 relative to the previous three months, we expect the size of the CAD to recede further to around $10-12 billion in Q4 FY2023,” Aditi Nayar, chief economist at rating agency ICRA said.

“Based on this, we project the FY2023 CAD at $77-80 billion (-2.3% of GDP), which is quite contained as compared to the levels that were being feared in mid 2022,” she added.

The median forecast of 22 economists polled by Reuters between March 16-23 projected a CAD of $23.0 billion for Q3FY23, or 2.7% of GDP.

The RBI said services exports reported growth of 24.5% on year in the quarter, driven by rising exports of software, business and travel services.

Private transfer receipts, mainly representing remittances by Indians employed overseas, rose by 31.7% to $30.8 billion from a year earlier.

The country’s balance of payments recorded a surplus of $11.1 billion compared to a $0.5 billion surplus in the same quarter a year earlier.