India’s Current Account Deficit in Q3 FY2025: A Detailed Analysis
What is the Current Account Deficit?
India’s current account deficit (CAD) experienced a slight increase to $11.5 billion in Q3 FY2025, which is 1.1% of the country’s GDP. This is a minor uptick from the previous year’s Q3, which stood at $10.4 billion (1.1% of GDP).
Q3 FY2025 vs Q2 FY2025
Compared to Q2 FY2025, the deficit decreased from $16.7 billion or 1.8% of GDP. The merchandise trade deficit also rose to $79.2 billion in Q3 FY2025 from $71.6 billion in the same quarter last year.
Expert Insight: Aditi Nayar, ICRA’s Chief Economist
According to Aditi Nayar, ICRA’s chief economist, the deficit was lower than anticipated. “This equated to 1.1% of GDP, similar to last year’s levels, and below the 1.8% recorded in Q2 FY2025 and ICRA’s estimate of 1.4% for that quarter.”
ICRA’s Predictions for Q4 FY2025
ICRA anticipates a current account surplus of around $4-6 billion in Q4 FY2025, driven by a seasonal increase in merchandise exports and a robust services surplus.
Net Services Receipts
- Net services receipts grew to $51.2 billion from $45 billion a year ago
- Major categories such as business services and computer services showed growth
Summary
Although India’s current account deficit expanded slightly in Q3 FY2025, it remained below expectations. With ICRA forecasting a current account surplus in Q4 FY2025, the country’s economic outlook remains optimistic.
