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Reserve Bank Governor Shaktikanta Das has said that Current Account Deficit (CAD), a key indicator of the external sector, is expected to moderate in second half of 2022-23 (H2FY23) from 3.3 per cent of GDP in April-September mainly due to moderation in imports. He noted that CAD had widened to 3.3 per cent of GDP in first half of 2022-23 from 0.2 per cent in the comparable period of 2021-22 on the back of a sharp increase in the merchandise trade deficit.

Das said the situation has shown improvement in Q3:2022-23 as imports moderated in the wake of lower commodity prices, resulting in narrowing of the merchandise trade deficit. Further, he said services exports rose 24.9 per cent year-on-year in the third quarter of 2022-23, driven by software, business and travel services. Global software and IT services spending is expected to remain strong in 2023.

The Governor further said remittance growth for India in April-September 2022-23 was around 26 per cent – more than twice the World Bank’s projection for the year. This is likely to remain robust owing to better growth prospects of the Gulf countries. He also stated that the net balance under services and remittances is expected to remain in large surplus, partly offsetting the trade deficit. On the financing of CAD, he said the net foreign direct investment (FDI) flows remain strong at $22.3 billion during April-December 2022 ($24.8 billion in the corresponding period last year).