India recorded CAD of 3.3% of GDP in the first half of FY23 on a sharp increase in the goods trade deficit compared to 0.2% in the first half of FY22.

Net FDI inflows of US$20 billion in the first half of FY23 also declined marginally from US$20.3 billion in the first half of FY22. Portfolio investment recorded a net outflow of $8.1 billion for the first half of FY23, up from $4.3 billion a year ago. In the first half of the year, foreign exchange reserves were depleted by $25.8 billion, says the RBI.

The data shows that services exports grew 30.2% year-on-year (yoy), driven by rising exports of software, business and travel services. Services net income also increased both sequentially and year-on-year. Net expenditure from the primary income account, which primarily reflects payments of investment income, also increased to $12 billion from $9.8 billion a year earlier.

Personal remittance revenue, which represents remittances from Indians employed abroad, was $27.4 billion in the second quarter of FY23, up 29.7% year over year.

Net foreign portfolio investment recorded inflows of US$6.5 billion versus US$3.9 billion in the second quarter of FY22. Net commercial lending to India fell to just US$0.4 billion from US$4.3 billion a year ago. USD declined in the second quarter of fiscal 23.

The RBI also today released the 26th edition of the Financial Stability Report (FSR), stating that the Indian economy is facing severe global headwinds. “Nevertheless, solid macroeconomic fundamentals and healthy balance sheets in the financial and non-financial sectors provide strength and resilience and ensure stability of the financial system,” he added.

Buoyant demand for bank loans and early signs of a “rebound” in the investment cycle are benefiting from improving asset quality, return to profitability and strong capital and liquidity buffers from proposed commercial banks, it said. According to the report, the gross non-performing assets ratio of commercial banks (SCBs) fell to a seven-year low of 5% in September 2022, and net non-performing to a 10-year low of 1.3%.