Current account deficit climbs 3-fold to $13.7 bn in Q1 | business | Hindustan Times
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Current account deficit climbs 3-fold to $13.7 bn in Q1

business Updated: Sep 30, 2010 20:17 IST

India's current account deficit, representing net flow of income out of the country barring capital movements, surged three-fold to $13.7 billion in the April-June quarter over the same period last year.

The increase in current account deficit (CAD) during April-June this fiscal is due to higher imports because of economic recovery and larger payments overseas for certain services, according to the data on Balance of Payments (BOP) released by the Reserve Bank of India (RBI) today.

In the corresponding period last year, CAD stood at $4.5 billion.

The current account deficit, which includes deficit in external trade of goods, services, besides net investment income, stood at 2.9 per cent of GDP last fiscal, and experts believe that it will increase a bit to 3 per cent of GDP this fiscal.

However, if this trend continues CAD may turn out to be much higher than 3 per cent.

The net outflow of money on current account was, however, more than offset by inflow on capital account due to higher external commercial borrowings by India Inc and external assistance, the data revealed.

PM Economic Advisory Council Chairman C Rangarajan said, "Current account deficit will not be a problem to manage this fiscal due to high capital inflows."

India received $17.5 billion of foreign capital on net basis against $4.6 billion during the period, despite significant moderation in inflows by both foreign institutional investors because of the eurozone crisis and foreign direct investment.

As external commercial borrowings among other overseas debts rose, India's external debt rose by 4.1 per cent to 273.1 billion dollars from $230 billion.

The country received $4.6 billion in its capital markets from FIIs on net basis against 8.3 billion dollars. Net FDI inflow almost halved to $3.2 billion from $6.1 billion.

With the country receiving more capital inflows than its deficit on current account, there was net accretion of $3.7 billion to foreign exchange reserves of the country.