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Current account deficit widens to $21.8 b in Q1

Special Correspondent
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Excluding increase in gold imports, it will work out to $14.5 billion

The Reserve Bank of India (RBI), on Monday, said that India’s current account deficit (CAD) for the first quarter ended June 2013 has widened to 4.9 per cent of gross domestic product (GDP) compared to 4 per cent in the same period of the previous financial year.

“The trade deficit in the first quarter of 2013-14 increased owing to a rise in imports and some decline in merchandise exports,” the RBI said in a release

“The CAD of first quarter of 2013-14 was at $21.8 billion (4.9 per cent of GDP) and it was $16.9 billion (4 per cent of GDP) in the first quarter of 2012-13,” the RBI added.

Excluding the increase in gold imports of $7.3 billion in the first quarter of 2013-14 over the corresponding quarter of the preceding year, the RBI said that “the CAD would work out to $14.5 billion, which translates into 3.2 per cent of GDP.”

On Balance of Payments (BoP) basis, merchandise exports declined by 1.5 per cent to $73.9 billion in the first quarter of 2013-14 compared with a decline of 4.8 per cent at $75 billion in the year-ago period.

Merchandise imports

In contrast, merchandise imports recorded an increase of 4.7 per cent at $124.4 billion as against a decline of 3.9 per cent at $118.9 billion, “primarily led by a steep rise in gold imports in the first two months of the quarter.”

Notwithstanding a net outflow in portfolio investment, led by foreign institutional investor (FII) debt outflows, net inflows under capital and financial account (excluding changes in foreign exchange reserves) rose by 25.2 per cent to $20.5 billion in the first quarter of 2013-14 from $16.4 billion in first quarter of 2012-13.

“The rise was mainly on account of increase in FDI (foreign direct investment) and loans availed by banks,” said the RBI.

While net foreign direct investment surged to $6.5 billion in the first quarter of the current fiscal from $3.8 billion in the first quarter of 2012-13, net portfolio investment registered a marginal outflow of $0.2 billion compared with an outflow of $2 billion, primarily led by the debt component of FII investment.

Net overseas borrowing by banks, however, increased by 57.5 per cent to $4.7 billion in the first quarter of 2013-14 from $3 billion in first quarter of 2012-13. Net external commercial borrowings (ECBs) at $0.4 billion remained unchanged.

On BoP basis, the RBI said, “There was a slight drawdown in foreign exchange reserves of $0.3 billion in the first quarter of 2013-14 as against an accretion of $0.5 billion in the first quarter of 2012-13.”

CAD touched a record high in the third quarter (October to December) of last fiscal at 6.7 per cent after recording another high at 5.4 per cent in the second quarter (July to September) of the last fiscal.

It had declined to 3.6 per cent in the January-March quarter of the same financial year.


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