Current account deficit drops sharply to 3.6% of GDP in Q4

India’s current account deficit (CAD) moderated sharply to 3.6 per cent of GDP in Q4 of 2012-13, according to the Reserve Bank of India (RBI) data released today.

CAD had touched a historically high level of 6.7 per cent of GDP in Q3 of 2012-13 as trade deficit narrowed.

During 2012-13, CAD stood at $87.8 billion (4.8 per cent of GDP) against $78.2 billion (4.2 per cent of GDP) during 2011-12.

Trade deficit narrowed to $45.6 billion in Q4 of 2012-13 from $51.6 billion in Q4 of 2011-12.

Merchandise exports, imports

Merchandise exports (Balance of Payment basis) increased 5.9 per cent in Q4 of 2012-13 compared with 2.6 per cent in Q4 of 2011-12, RBI said.

Further, merchandise imports recorded a marginal decline of 1 per cent in Q4 of 2012-13 against an increase of 22.6 per cent in Q4 of 2011-12.

Essentially, non-oil non-gold component of imports showed a decline, reflecting slowdown in domestic economic activity.

Net capital inflows

Net capital inflows under financial account moderated in Q4 of 2012-13 largely due to slowdown in net portfolio investment and net repayment of loans by banks and corporates.

However, net capital inflows were more than adequate to finance CAD, resulting in accretion of $2.7 billion to the foreign exchange reserves.