India’s current account deficit (CAD) widened from 5.4 per cent in the July-September quarter to a record high of 6.7 per cent of GDP in the October-December quarter, driven mainly by huge trade deficit, said a release by the Reserve Bank of India. This is much higher than the 6.4 percent estimated by a Media poll.
A surge in capital flows helped finance the current account deficit.
“The pickup in capital flows was mainly due to foreign portfolio investment which rose to USD 8.6 billion during Q3 of 2012-13 from USD 1.8 billion in Q3 of previous year. While loans availed by banks and corporate sector amounted to USD 7.1 billion, net Foreign Direct Investment (FDI) declined to USD 2.5 billion in Q3 of 2012-13 from USD 5 billion in the corresponding quarter of 2011-12,” the RBI release said.
Exports growth during the third quarter was muted as compared with a 7.6 per cent growth in Q3 of 2011-12, the RBI release said.
Imports, however grew 9.4 per cent, spurred largely by oil and gold imports.This has resulted in the trade deficit widening to USD 59.6 billion in Q3, compared to USD 48.6 billion during the corresponding period of the previous year.