MUMBAI : India’s current account deficit narrowed to $1.2 bln, or 0.2% of its gross domestic product, in Jan-Mar from $18.1 bln or 3.6% of GDP in the corresponding period a year ago, as a steep fall in gold imports resulted in a marked improvement in the trade deficit, data released by the Reserve Bank of India showed.
For 2013-14 (Apr-Mar), India’s current account deficit stood at $32.4 bln or 1.7% of the GDP, sharply lower than the year ago figures of $87.8 bln or 4.7% of GDP.
For Oct-Dec, the current account deficit was at $4.2 bln or 0.9% of GDP. India’s trade deficit in 2013-14 fell sharply to $147.6 bln from $195.7 bln a year ago, with data showing that the gold imports amounted to $28.81 bln in the last financial year, and $5.32 bln in Jan-Mar.
In contrast, the Jan-Mar quarter in 2012-13 had seen gold imports of $15.81 bln, while 2012-13 as a whole had seen the import of gold worth $53.82 bln. India’s merchandise trade deficit in Jan-Mar contracted around 33% on-year to $30.7 bln, the RBI said. Imports for the quarter were down 12.3% at $114.3 bln, while exports were lower by 1.3% at $83.7 bln.
Faced with a rapidly widening current account deficit along with the deterioration in the rupee’s exchange rate, the central bank and the government had imposed several restrictions on the import of gold, with the precious metal being the second largest item in India’s import basket after crude oil.
Last week, the RBI eased the norms by allowing a greater number of entities to import gold under its ’80:20′ scheme.
Export of services in Jan-Mar amounted to $40.6 bln, while imports stood at $21.0 bln. Net services receipts, as a result, were $19.6 bln, up 15.6%, as against a 3.9% fall in the year ago period.
Jan-Mar saw the accretion of $7.1 bln to India’s foreign exchange reserves on a balance-of-payment basis. In 2013-14, India’s foreign exchange reserves increased by $15.5 bln, as compared to $3.8 bln increase seen in 2012-13. Net inflows under the capital and financial account in 2013-14 fell to $48.8 bln from $89.0 bln a year ago.
The RBI said the fall in net inflows was on account of “lower net FDI (foreign direct investment) and portfolio flows, net repayment of loans and trade credit and advances.”
“In the financial account, on net basis, both foreign direct investment and portfolio investment recorded inflows in Q4 (Jan-Mar) of 2013-14. While net inflow on account of portfolio investment was $9.3 bln, net FDI flow was lower at $0.9 bln,” the RBI said.
“…concerns regarding the vulnerability of India’s external sector are likely to be limited in FY15 (2014-15). Notwithstanding the expectation that tapering of the US Federal Reserve’s quantitative easing programme would continue over 2014, portfolio flows into India in 2014-15 are likely to exceed the level seen in 2013-14
on account of improved sentiments, a mild recovery in domestic growth
and continued interest rate differentials with advanced economies,” Aditi Nayar, senior economist –
ICRA, said. -Cogencis