India's Economic Health: A Closer Look

In a recent update from the Reserve Bank of India, it was revealed that the country's current account deficit (CAD) has narrowed to 1.2% of GDP in the second quarter of FY25. This marks a slight improvement from the 1.3% recorded in the same period last year.

Despite a significant increase in the trade deficit, which expanded to $75.3 billion up from $64.5 billion a year ago, India's economy has shown resilience. The increase in trade deficit was primarily driven by higher gold imports. However, this was offset by robust services exports, which increased to $44.5 billion in Q2 FY25 from $39.9 billion in Q2 FY24, and steady remittance inflows.

In absolute terms, the CAD declined to $11.2 billion in Q2 FY25 from $11.3 billion in the same period last year, showcasing the country's ability to manage its external finances effectively amidst global economic uncertainties.