The sharp fall in India's current account deficit (CAD), a broad measure of the gap between dollar outflows and inflows, will limit its vulnerability to global financial market volatility, though persistently high inflation remains a major risk, credit rating agency Moody's has said in a report.
"With India, signs of a decline in its high CAD as a percentage of GDP and the make up of the government's debt profile limit the extent of sovereign exposure to global financial market volatility. But continued higher inflation poses risks," the report said.
India's CAD dropped sharply to $4.2 billion or 0.9% of GDP during October-December 2013 from $31.9 billion or 6.5% of GDP in the same quarter of the previous year. Plunging gold imports and a rebound in exports have helped bring in dollars and rein in the deficit.
CAD stood at $5.2 billion or 1.2% of GDP during July-September. India looks on course to contain the deficit within $45 billion in 2013-14, down from $88 billion last year.
The gap tapered sharply over the last two quarters after the government and the Reserve Bank of India launched a string of steps including gold import curbs.
Budding signs of recovery in the US and Europe, two of India's biggest export markets, resulted in a surge in shipment orders from the country.
Wholesale inflation rate eased to a nine-month low of 4.68% in February from 5.05% in the previous month, while retail inflation eased to a two-year low of 8.10% in January from 8.79% in the previous month.