Current account deficit in Q3 narrows to $4.2 b

Rising exports and moderation in gold imports have pulled down India’s current account deficit (CAD) sharply to $4.2 billion, or 0.9 per cent of GDP, in December quarter of 2013-14.

“The lower CAD was primarily on account of a decline in the trade deficit as merchandise exports picked up and imports moderated, particularly gold imports,” the Reserve Bank said while releasing the external sector data.

The CAD, which reflects difference between inflow and outflow of foreign currency, stood at $31.9 billion, or 6.5 per cent of GDP, in October-December quarter of 2012-13.

It narrowed to $31.1 billion (2.3 per cent of GDP) in April-December 2013 from $69.8 billion (5.2 per cent of GDP) in April-December of 2012.

The reduction, RBI said, was due to contraction in the trade deficit, coupled with a rise in net invisible receipts.

In his interim budget speech, Finance Minister P Chidambaram had said the year-end CAD will be contained at $45 billion, well below the record high level of $88 billion in 2012-13.

High gold imports was one of the major reasons for the record CAD.

Earlier in the day, Chidambaram said government would revisit the import duty on gold only after factoring in the year-end CAD data.

The Balance of Payments (BoP) during October-December 2013 period released by the RBI revealed that merchandise exports increased by 7.5 per cent to $79.8 billion in Q3 of 2013-14. This was on the back of significant growth especially in the exports of engineering goods, readymade garments, iron ore, marine products and chemicals.

Merchandise imports at $112.9 billion, recorded a decline of 14.8 per cent in Q3 of 2013-14 as against an increase of 10.4 per cent in Q3 of 2012-13.