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India CAD narrows to 3.6 percent GDP

June 27, 2013 at 7:41 AM   |   Comments

NEW DELHI, June 27 (UPI) -- India's current-account deficit, blamed for the rupee's steep decline, "moderated sharply" in January-March to $18.1 billion, the central bank said Thursday.

The CAD translated to 3.6 percent of the country's gross domestic product during the quarter, compared to 6.7 percent of the GDP in the October-December quarter, the Reserve Bank of India said on its website.

"India's current account deficit moderated sharply to 3.6 percent of GDP in Q4 of 2012-13 from a historically high level of 6.7 percent of GDP in Q3 of 2012-13 as [the] trade deficit narrowed," the bank said.

The deficit in the October-December quarter totaled $32.6 billion. The deficit in the January-March quarter a year ago was $21.7 billion.

For all of the fiscal year which ended March 31, the deficit was $87.8 billion (4.8 percent of GDP), up from $78.2 billion (4.2 percent of GDP) in the prior year.

"Burgeoning trade deficit along with significant decline in invisible earnings caused widening of CAD during the year," the bank said.

The Indian rupee, which has taken a beating in recent sessions, crossed the psychological barrier of 60 to a U.S. dollar Wednesday, dropping as low as 60.7 rupees. Besides the CAD, the rupee, like other currencies, also has been hit by expectations the U.S. Federal Reserve will soon begin to taper off its monetary easing, which has also helped pump huge liquidity globally and encouraged much foreign institutional investment into India.

Analysts speaking to the Hindustan Times also stressed the need for inflow of foreign capital and the government's ability to curb inflation. Higher inflation means the central bank would be reluctant to cut interest rates needed to spur growth.

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