The country’s Current Account Deficit (CAD) widened to 4.4 per cent of Gross Domestic Product (GDP) in the second quarter (Q2) of 2022-23 on higher merchandise trade deficit. 

In the same quarter of the previous financial year of 2021-22, CAD had stood at 1.3 per cent of GDP and at 2.2 per cent of GDP in Q1 of FY2023, according to the data released by the Reserve Bank of India (RBI) on Thursday. 

In absolute terms, the current account balance recorded a deficit of $36.4 billion in Q2 FY2023 compared to a deficit of $9.7 billion in the corresponding period of the previous financial year. 

The rise in CAD was primarily on account of the widening of merchandise trade deficit, reflecting the impact of slowing global demand on exports, even as growth in services exports and remittances remained robust, RBI’s Financial Stability Report (FSR) released on Thursday said.

The merchandise trade deficit widened to $83.5 billion in Q2 FY2023 from $63 billion in the first quarter of the current financial year. 

Services exports reported growth of 30.2 per cent on a year-on-year (y-o-y) basis on the back of rising exports of software, business and travel services. 

During Q2 FY2023, net foreign portfolio investment recorded inflows of $6.5 billion, up from $3.9 billion during the year-ago quarter. 

During July-September 2022, the country recorded a balance of payment (BoP) deficit of $30.37 billion compared to a surplus of $31.19 billion in the year-ago quarter.