India's capital account and financial account flows remain largely supportive

India's central bank, RBI announced its balance of payments for the calendar quarter Q3 2015 on December 22.

There is a marginal decline in the country's current account deficit in third quarter, which was widening to USD8.2 bn which is 1.6% of GDP. In H1 2015, the total deficit comes to $14.3bn.

The current account deficit contraction was mainly on account of lower trade deficit (US$ 37.4 billion) when compared with US$ 39.7 billion in Q2 of 2014-15 though it was higher than the level in the previous quarter (US$ 34.2 billion).

The capital account and financial account flows remain largely supportive, but they moderated considerably in this quarter owing to challenging market conditions and portfolio outflows, which led to a small balance of payments deficit of USD0.9bn. 

Although there was a marginal moderation in the net services receipts on y-o-y basis largely due to fall in export receipts in transport, insurance and pension services, there has been some improvement over the preceding quarter.

"We expect this to reverse in Q4 15 and believe the overall BoP will return to a surplus", says Barclays in a research note.