(Bloomberg) -- India’s current account deficit widened marginally last quarter as the nation’s trade gap increased due to higher imports and weak exports.
The shortfall in the broadest measure of trade in goods and services was $9.7 billion, or 1.1% of gross domestic product in the quarter, the Reserve Bank of India said in a statement on Monday. This compares with a revised surplus reading of $4.6 billion seen in the January-March quarter.
Strong domestic demand and weak outbound shipments resulted in a wider trade deficit during the period. The trade gap in the quarter rose to $65.1 billion, from $56.7 billion a year ago, the data showed. However, services exports remained strong as activity in computer, business and travel remained healthy, the central bank said.
“The reading is broadly in-line with expectations,” said Teresa John, an economist at Nirmal Bang Institutional Equities. She expects a gap of around 1.2% of GDP in the current financial year.
A rise in gold imports could further widen the current account gap in the coming quarters, said Madhavi Arora, an economist at Emkay Global Financial Services Ltd, by message. “However, overall we see external fundamentals staying steady and financing needs remaining manageable.”
Easing oil prices should also augur well for current account dynamics, she said, forecasting the gap to stay at 1% or even below 1% of GDP in the fiscal year through March 2025.
A wider deficit may put more pressure on the rupee, which is hovering near its record low in recent weeks. However, RBI Governor Shaktikanta Das has indicated the central bank will prevent any undue volatility in the rupee by using its reserves.
Here are more details from the statement:
- Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $29.5 billion, up from $27.1 billion during the corresponding period a year ago
- Net foreign direct investment recorded a net inflow of $6.3 billion, compared with a net inflow of $4.7 billion in the corresponding period of 2023-24
- Net inflows under foreign portfolio investment moderated to $0.9 billion from $15.7 billion in the same period from a year earlier
--With assistance from Preeti Soni.
(Updates with a fresh economist comment in the fifth paragraph.)
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