According to an official report, it is expected by a government to have a surplus in its current account balance for the first quarter of FY 20-21 and in the final quarter of the previous fiscal 19-20 on account of reduced imports due to significant drop in domestic economic activity.
“As a considerable drop in domestic economic activity significantly curtails imports, India’s current account balance may generate a small surplus in the first quarter of 2020-21,” said the May 2020 macroeconomic report released by the ministry of finance.
India’s current account deficit (CAD) was also supported by low levels of external debt servicing, it added.
“During COVID-19 times, the external debt and its repayment burden is a major challenge being faced by some emerging market economies. However, India is not vulnerable on this count as its external debt to GDP ratio has remained low at about 20 percent during the last three years,” the report said.
According to an April SBI research report, the country could see a current account surplus of 0.7% of gross domestic product (GDP) at $19 billion this fiscal owing to a collapse in oil prices and an expected 25% decline in merchandise imports.
According to the government report, net foreign direct investment inflows rose from $1.98 billion in February 2020 to $2.87 billion for the March. This resulted in a cumulative net inflow of $42.7 billion during FY20, up from $30.7 billion a year ago.
