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  3. Current account deficit widens to 4.9% of GDP in April-June quarter, 2013

Current account deficit widens to 4.9% of GDP in April-June quarter, 2013

01 Oct 2013 Evaluate

Giving no respite to policymakers battling with weak macro-economic indicators, India's current account deficit widened to $21.8 billion or 4.9 percent of the gross domestic product or GDP, in the April-June quarter of FY14 as compared to 3.6 percent of GDP in the previous quarter and $ 16.9 billion or 4.0 percent of GDP in the Q1 of previous financial year. 

CAD, which represents the difference between a country's total imports of goods, services and transfers and their exports, witnessed a steep rise mainly due to high gold imports and decline in merchandise exports. During the April-June quarter, Indian merchandise exports declined by 1.5 percent to $73.9 billion from $75.0 billion recorded in the same quarter of previous fiscal. In contrast, merchandise imports recorded an increase of 4.7 percent at $124.4 billion in Q1 of FY14 $ 118.9 billion in Q1 of FY13, primarily led by a steep rise in gold imports in the first two months of the quarter. Indian gold imports witnessed an increase of $7.3 billion in Q1 FY14 over the corresponding quarter of previous fiscal and by excluding increase in gold imports, CAD stood at $14.5 billion, which translates into 3.2 percent of GDP.

On service sector, net receipts of services during the quarter surged to $16.9 billion as compared to $15.0 billion in the corresponding period of 2012-13 and the lower-than-expected figure was due in part to stronger inflows from software exports, helped by the weaker rupee.

Though, the CAD is likely to ease in subsequent quarters as government’s efforts to increase the import duty on gold have constricted imports of the metal, while improving global demand and a weaker Indian currency are expected to help exports. But high CAD has become a cause of concern for the country as it has made vulnerable to a surge in capital flows out of emerging markets in recent months.

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