Current account deficit widens to 4.9% of GDP in first quarter
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India's current account deficit (CAD) in the first quarter of the current fiscal (April-June of 2013-14) was $21.8 billion, which works out to a disconcerting 4.9 per cent of GDP, according to data released by the RBI on Monday.
High imports of gold and oil largely led to a worsening of the trade deficit during the quarter, coupled with a slow recovery in net invisibles (income and services), resulting in the sharp widening of the CAD to $21.8 billion in the latest reported quarter from $16.9 billion (or 4.4 per cent) in the corresponding quarter of the previous fiscal.
The CAD, or the difference between inflow and outflow of foreign exchange, had declined to 3.6 per cent of GDP in the January-March quarter after touching a record high in the October-December quarter. The government plans to bring down CAD to 3.7 per cent or $70 billion in fiscal 2013-14, down from 4.8 per cent or $88.2 billion in 2012-13.
The silver lining, though, is that the CAD estimates — a major factor responsible for the recent fall in the rupee — are expected to sharply improve in the coming quarter on the back of sharply higher export numbers and a moderation in oil and gold imports.
"The trade deficit in Q1 of 2013-14 increased owing to a rise in imports and some decline in merchandise exports. Excluding the increase in gold imports of $7.3 billion... CAD would work out to $14.5 billion, which translates into 3.2 per cent of GDP," the RBI said.
The trade deficit widened further to $50.5 billion in Q1 from $43.8 billion a year ago. External debt was at $ 388.5 billion as on June 30, a decline of 0.9 per cent over March end.
Fiscal deficit at two-thirds of target during April-August
The Centre's fiscal deficit touched two-thirds of its full year target in just four months of 2013-14 led by a slowdown in tax revenue and high plan spending.