Current account deficit doubles to $8.2 bn in Dec quarter

The current account deficit (CAD) nearly doubled to USD 8.2 billion or 1.6 percent of the GDP in the October-December period, the Reserve Bank data showed Tuesday.

Mumbai: The current account deficit (CAD) doubled to USD 8.2 billion or 1.6 percent of the GDP during December quarter on year-on year basis, despite an improvement from the preceding quarter level, according to RBI data released Tuesday.

During October-December period of last fiscal, the CAD -- which is the gap between foreign exchange earned and spent -- stood at USD 4.2 billion or 0.9 percent of GDP.

On sequential basis, however, the CAD narrowed from USD 10.1 billion or 2 percent of GDP in the September quarter.

It has narrowed to 1.7 percent for the first nine months of the current fiscal, driven down by lower oil prices and higher services exports that offset the dip in merchandise shipments.

Analysts have, however, have already pencilled in a current account surplus of over 1.5 percent of GDP in the March quarter on account of the massive fall in crude prices and also other commodities. Crude at present is trading around 40 percent lower than last year's.

According to the Reserve Bank data, in the April-December period of last fiscal, CAD stood at USD 31.1 billion or 2.3 percent of GDP.

Many analysts are of the opinion that the continuing decline in crude prices will see the country posting a current account surplus in the current March quarter, which would be the first surplus since the March quarter of 2007.

This would also mark a smart turnaround from the record high CAD of 4.8 percent of GDP in FY 2013, which sparked the country's worst currency crisis in more than two decades.

Meanwhile, the RBI data showed that the balance of payments stood at a surplus of USD 13.2 billion during December quarter, which is a fifth consecutive quarter of surplus.

Similarly, the capital and financial account was also in surplus at USD 10 billion, according to the data.

The quarter-on-quarter decline in CAD is a positive surprise," Aditi Nayar, senior economist with rating agency Icra, said.

A higher services surplus, lower outflows of primary income and smaller net oil imports offset the considerable rise in gold imports between second and the third quarter, she added.

"A further moderation in the net oil import bill is expected to contribute to a small current account surplus in the ongoing quarter, helping to restrict the current account deficit below USD 28 billion or 1.4 percent of GDP in FY15," Nayar said.

"If global commodity prices do not register a sharp rebound, CAD deficit is expected to print below 1 percent of GDP in FY16," she added.

In a note earlier this year, Japanese brokerage, Nomura had said with a steep fall in global crude oil prices, the country may report its first current account surplus in over seven years at 1.5 percent of GDP in the ongoing quarter.

The merchandise trade deficit widened to USD 39.2 billion during the reporting quarter as exports declined 7.3 percent against a 4.5 percent dip in imports.

"The decline in merchandise exports remains a concern, particularly given the uncertain growth outlook for key trading partners such as the euro zone and Japan," Nayar said.

The inward remittances stood at USD 17.5 billion and supported the balance of payments with a 12.6 percent share in the overall receipts, RBI data showed.

The net inflows of foreign direct and portfolio investments were somewhat lower compared to the September quarter.

Net loans availed by banks rose by USD 6.6 billion in December quarter mainly on account of inward repatriations of assets held abroad by banks, RBI said.

There was a net accretion of USD 13.2 billion to the foreign exchange reserves during the quarter, which was double from USD 6.9 billion in the preceding quarte,r but lower than the special non-residents' and overseas borrowings by banks boosted the figure last year.

For the April-December period, the RBI said there is a considerable improvement in the BoP on account of higher growth in merchandise exports and a marginal rise in imports.

The trade deficit narrowed to USD 112.5 billion in the April-December period from USD 116.9 billion a year-ago. The net inflows under the capital and financial account rose to USD 61.7 billion in the first nine months of the fiscal up from USD 39.6 billion in the year-ago period.

The total accretion to the forex kitty for the first three quarters was USD 31.3 billion against a low USD 8.4 billion in the previous fiscal.