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India not worried about hefty current account deficit

India's $13 billion current account deficit is manageable and will be covered by capital inflows, Trade Secretary Rahul Khullar said, playing down concerns about the worst shortfall in nearly 3 decades.

business Updated: Jul 19, 2010 18:32 IST

India's $13 billion current account deficit is manageable and will be covered by capital inflows, Trade Secretary Rahul Khullar said on Monday, playing down concerns about the worst shortfall in nearly 3 decades.

While the current account deficit figure for the current June-August quarter has not yet been made public, the deficit widened to $13 billion in the January-March quarter, the biggest since 1981, compared to $12.2 billion in October-December, official data showed.

But Khullar told Reuters in an interview that this did not worry the government as capital inflows will be more than sufficient to finance the deficit.

He also pointed to the slight improvement in the balance of payments surplus, which in Jan-March was $2.1 billion compared with a surplus of $1.8 billion in the Oct-Dec quarter, as another factor to ally concerns.

"I run a huge deficit on the balance of trade on goods and a surplus in my services account, as a result that my current account deficit is manageable. Manageable in that it remains within 1.5 to 2 pct of GDP," Khullar said.

Despite the crisis in the euro zone, capital flows have been robust this year with an inflow of $8.5 billion so far.

India's current account deficit has been widening since the first quarter of 2009, sparking concern that it will continue to deteriorate, and eventually weigh on the rupee.