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India's current account deficit narrowed in the July-September quarter of the current financial year due to a lower merchandise trade deficit and an increase in services exports, the RBI said on Tuesday.

The current account deficit (CAD) stood at $8.3 billion or 1 per cent of GDP in the second quarter of 2023-24, compared to $9.2 billion or 1.1 per cent of GDP in the preceding quarter.

The CAD had been at $30.9 billion or 3.8 per cent of GDP in the same quarter a year ago.

The merchandise trade deficit narrowed to $61 billion in the quarter, from $78.3 billion in the year-ago quarter. The decline in the country’s oil import bill due to the decline in crude prices during the quarter played a key role in the decline in the trade deficit.

"Services exports grew by 4.2 per cent on a year-on-year basis on the back of rising exports of software, business and travel services. Net services receipts increased both sequentially and on a year-on-year basis," the RBI said.

Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $28.1 billion, increasing by 2.6 per cent from their level during the corresponding period a year ago.

NRI deposits also recorded a net inflow of $3.2 billion during the second quarter of the current financial year as compared to net inflow of $2.5 billion in Q2 of 2022-23.

There was an accretion of foreign exchange reserves (on a BoP basis) to the tune of $2.5 billion in Q2: 2023-24 as against a depletion of $30.4 billion in Q2: 2022-23.