CAD rises to record high of 6.7% in Q3

CAD rises to record high of 6.7% in Q3

Trade gap was $32.63 b during Sept-Dec quarter

India’s current account deficit (CAD) widened to a record high 6.7 per cent of the gross domestic product (GDP) in the December quarter driven by huge trade deficit owing to heavy oil and gold imports, said a statement issued by the Reserve Bank of India (RBI) on Thursday.

However, a surge in capital flows helped finance the current account deficit. In this context, the RBI statement stated, “The pickup in capital flows was mainly due to foreign portfolio investment which rose to $8.6 billion during Q3 of 2012-13 from $1.8 billion in Q3 of the previous year. While loans availed by banks and corporate sector amounted to $7.1 billion, net Foreign Direct Investment (FDI) declined to $2.5 billion in Q3 of 2012-13 from $5 billion in the corresponding quarter of 2011-12.”

The balance of payments was in the surplus of $781 million, compared with a deficit of $158 million in the previous quarter, showed RBI data.

India’s CAD was at $32.63 billion in the three months through December, as compared with $20.16 billion in the same period a year earlier. In July-September, the current account deficit had widened to $22.3 billion from $16.6 billion in the previous quarter.

The financial account, which includes foreign direct investment, portfolio investment and overseas borrowing by Indian companies, stood at a surplus of $31.1 billion, compared with $24.2 billion in the September quarter.

Exports growth during the third quarter was muted as compared with a 7.6 per cent growth in Q3 of 2011-12, while imports grew 9.4 per cent, spurred largely by oil and gold imports, it said.

This has resulted in the trade deficit widening to $59.6 billion in Q3, compared to $48.6 billion during the corresponding period of the previous year, it added.