The quarter also saw net foreign portfolio and foreign direct investment drop while remittances from foreign workers fell.

The current account surplus increased sharply to 3.9% of the gross domestic product (GDP) in the first quarter, compared to 0.1% in the preceding quarter.

This is the second consecutive quarter that the country has seen a current account surplus.

Private transfer receipts, mainly representing remittances by Indians employed overseas, increased to $18.2 billion, down by 8.7% from their level a year ago.

In the financial account, net foreign direct investment at $0.4 billion was lower than $14 billion in Q1 of 2019-20. Foreign portfolio investment recorded net inflows of $0.6 billion, against an outflow of $4.8 billion in Q1 of 2019-20 on account of net purchases in both the debt and equity markets.

“The surplus in the current account in Q1 of 2020-21 was on account of a sharp contraction in the trade deficit to $10 billion because of a steeper decline in merchandise imports relative to exports on a year-on-year basis,” according to the Reserve Bank of India.

The surplus was above expectations, as the fall in remittances was remarkably muted, despite the adverse economic conditions globally amid the ongoing pandemic, said Icra.

“With a merchandise trade deficit of $11.6 billion in July-August 2020 ($27.3 billion in July-August 2019), exceeding the $9.1 billion recorded in Q1 FY2021, Icra anticipates that the size of the current account surplus would halve to around $10 billion in Q2 FY2021,” according to the rating agency.

Icra has revised its expectation of the size of India’s current account balance in FY2021 to $35 billion or around 1.4% of GDP.