(Bloomberg) -- India’s current account deficit stayed largely flat in the July-September period from the previous quarter’s number, which was revised up sharply.
The shortfall in the broadest measure of trade in goods and services was $11.2 billion in the quarter, or 1.2% of gross domestic product, the Reserve Bank of India said in a statement on Friday. This compares with a gap of $11.3 billion in the April-June period, which was revised up from a deficit of $9.7 billion reported earlier. Median estimate in a Bloomberg survey of 14 economists was for a deficit of $15.3 billion for the July-September period.
Strong domestic demand, particularly for gold, drove the South Asian nation’s import bill up during the quarter, which typically sees a jump in spending as Indians prepare for the Diwali festival season. The country’s trade deficit had widened unexpectedly in August as a weakness in global demand slowed exports, while gold imports saw a sharp spike after the government slashed the duty on the metal to 6% from 15% in July.
The current account is likely to widen substantially in the October-December period after India’s trade deficit ballooned to a record high in November, driven by a fourfold jump in gold imports. However, there are concerns that officials may have over estimated shipments of the precious metal for the month, and attempts are underway to reconcile the data.
The latest numbers could bring some relief for the rupee, which fell to an all-time low of 85.8150 against the dollar Friday. The central bank’s frequent interventions to stem the fall of the rupee have depleted foreign exchange reserves by over $50 billion since its peak of about $705 billion seen in September.
The deficit being well below expectations will provide “some solace in light of the sharp weakening in the rupee seen recently,” said Aditi Nayar, chief economist at ICRA Ltd. The current account gap in October-December period will likely be wide, but for the full financial year, “the current account deficit may print around 1.1-1.2% of GDP,” Nayar said.
The trade gap in the quarter rose to $75.3 billion, from $64.5 billion a year ago, RBI data showed. Net services exports climbed to $44.5 billion in the quarter, from $39.9 billion in the same period a year ago, the central bank said.
- Private transfer receipts, mainly representing remittances by Indians employed overseas, rose to $31.9 billion from $28.1 billion during the corresponding period a year ago
- Net foreign direct investment recorded an outflow of $2.2 billion, compared with an outflow of $0.8 billion in the year ago quarter
- Foreign portfolio investment recorded net inflows of $19.9 billion from $4.9 billion a year ago
--With assistance from Malavika Kaur Makol.
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