Macro view: Reading Indian economy's Q1 FY24 numbers

The first quarter of FY 2023-24 (Q1 FY24) saw rising current account deficit (CAD) amid trade imbalances despite a capital surplus boost, according to a research report by Kotak.

In the April-June 2023 period, CAD as a portion of the gross domestic product (GDP) increased. This was primarily because the country spent more on goods from other countries and earned less from services provided to other countries.

Despite this, there was a surge in the capital account surplus, thanks to substantial investments from foreign countries and banking capital.

The balance of payments (BOP) rose to $24.4 billion, showing more money coming into the country.

However, the forecast for the second half of the fiscal year 2024 (H2 FY24) is uncertain. CAD as a percentage of GDP is expected to increase to 1.6 per cent between July 2023 and March 2024, with a BOP deficit of $23.5 billion, indicating more money leaving the country.

CAD for Q1 FY24 was as anticipated, reaching $9.2 billion (1.1 per cent of GDP). The increase was mainly due to a larger deficit in non-oil goods trade, rising to $32 billion. Other services, such as software, and professional and management consulting, remained stable from the last quarter of the fiscal year 2023 (Q4 FY23).

Read the Kotak report here.