Arab Today, arab today india’s current account deficit at peak
Last Updated : GMT 05:42:12
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Arab Today, arab today

India’s current account deficit at peak

Arab Today, arab today

Arab Today, arab today India’s current account deficit at peak

Mumbai - Arabstoday

India’s current account deficit touched a record high in the March quarter, as surging imports and only moderate export growth pushed up the trade deficit, keeping the balance of payments in deficit for the second quarter in a row. Hefty oil and gold imports weighed on India’s external position during the quarter, although economists said they expect the gap to narrow in the June quarter as oil prices fell and gold imports eased. The widening current account deficit has weighed on the rupee, pulling the Indian unit to a record low of 57.32 to the dollar on June 22. Investors have become wary of Indian markets as economic growth slipped to a nine-year low, the current account deficit widened and Standard & Poor’s threatened to cut the country’s credit rating to junk, making the rupee the worst performing currency in Asia this year. “What it (rupee) hasn’t factored in is a likely improvement in the current account in the first quarter (April-June),” said Abheek Barua, chief economist at HDFC Bank in New Delhi. “So there is scope for a reversal and stability in the rupee.” India’s balance of payments deficit was $5.7 billion in the first three months of 2012, narrower than the $12.8 billion deficit in the December quarter, Reserve Bank of India data showed. But that compared with a surplus of $2 billion in the March quarter of 2011. “Despite the slowdown in economic activity and rupee depreciation, growth in merchandise imports moderated only mildly from 27.7 per cent in the fourth quarter of (fiscal) 2010-11 to 22.6 per cent in the fourth quarter of 2011-12, reflecting inelastic demand for gold and oil,” the central bank said on Friday. The fiscal year ends in March. The country’s current account deficit hit an all-time high of $21.7 billion in the March quarter, or 4.5 per cent of gross domestic product (GDP), from $6.3b in the same quarter a year earlier, the RBI data showed. For the full fiscal year of 2011/12, the current account deficit was $78.2 billion or 4.2 per cent of GDP, deeper than the $46 billion deficit in 2010/11, the RBI said. In the December quarter, the current account deficit was  $19.95 billion. “I expect the (current account) deficit to reduce over the next two quarters due to lower oil prices, and slower gold imports,” said D.K. Joshi, chief economist at CRISIL, adding that he expects the current account deficit for the current fiscal year at 3.6 per cent of GDP. India’s trade deficit in the March quarter stood at $51.6 billion, from a $48.7 billion deficit in the December quarter and a $30 billion deficit a year earlier. India’s financial account, which includes foreign direct investment and portfolio investment as well as overseas borrowing by Indian companies, ran a surplus of $16.5 billion in the March quarter compared with $20.5 billion in the October quarter and $9.1 billion a year earlier.

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