Current Account Deficit Widens To $16.9 Billion In October-December

The current account deficit widened to $16.9 billion in October-December, as the country's key external parameters weakened on higher imports and dollar outflows, Reserve Bank of India data showed on Friday. The current account deficit stood at 2.5 per cent of the gross domestic product (GDP) in the December quarter, compared with $13.7 billion or 2.1 per cent of GDP a year ago on the back of widening trade deficit worth $49.5 billion.

Balance of payments, which represents the difference between current account and capital account, slipped into a deficit of $4.3 billion in the December quarter from a surplus of $9.4 billion a year ago, data showed.

However, the numbers are expected to get better going ahead as dollar inflows have turned robust on expectations of Prime Minister Narendra Modi winning a second term at the general elections that start next month.

"Foreign portfolio outflows pressured BoP as well, even as pressures on current account deficit as well as capital account have eased appreciably lately," said Abhishek Upadhyay, senior economist, ICICI Securities Primary Dealership in Mumbai.

Stable oil prices are also expected to ease the current account deficit in future and boost the rupee exchange rate, which was one of the worst performers in Asia in 2018 dented by a surge in oil prices.

"Soft interest rates globally and expectations of a stable government post elections in India are expected to keep the foreign direct inflows and portfolio inflows strong, which will keep the rupee stable," said Shubhada Rao, chief economist, YES Bank in Mumbai.

The rupee has gained 2.2 per cent in March, its highest since November on the back of strong dollar inflows into equities. The rupee has firmed by 0.90 per cent so far this year, recovering most of its lost ground from last year.

The capital account surplus dived to $13.6 billion in October-December from $16.7 billion in July-September period.