Current account deficit spurts to 4.2% of GDP

Posted By:
Subscribe to GoodReturns

 Current account deficit spurts to 4.2% of GDP
In what is clearly another deteriorating economic figure, India's current account deficit rose to $78.2 billion (4.2 per cent of gross domestic product (GDP) in 2011-12 from $ 46 billion (2.7 per cent of GDP) in 2010-11. This the worst current account deficit in 20 years.

The spurt in the current account deficit largely reflects a high trade deficit, which is a result of large scale imports and lower exports.

"The stress witnessed in India's BoP in Q3 continued during Q4 of 2011-12 as well due to large increase in imports. While capital inflows improved reflecting significant increase in portfolio investment and non-resident deposits, they fell short of financing requirements, resulting in a drawdown of foreign exchange reserves. The trade deficit during the fourth quarter exceeded US$ 50 billion (10.6 per cent of GDP) and CAD rose to US$ 21.7 billion (4.5 per cent of GDP)," the RBI has said in a release.

On a BoP basis, growth in merchandise exports (y-o-y) decelerated sharply to 3.4 per cent during Q4 of 2011-12 from 46.9 per cent during the corresponding quarter of 2010-11. Imports registered a growth of 22.6 per cent during Q4 of 2011-12 as compared with 27.7 per cent in the corresponding quarter of the preceding year.

With export growth remaining substantially lower than import growth, the trade deficit widened to US$ 51.6 billion in Q4 of 2011-12 as compared with US$ 30.0 billion in Q4 of 2010-11.

Growth in net services exports in Q4 of 2011-12 also decelerated to 21.1 per cent as compared to 72.0 per cent in Q4 of 2010-11.

As a result of the falling exchange rate, net secondary income (private transfers) receipts rose significantly by 24.0 per cent (y-o-y) to US$ 16.9 billion in Q4 of 2011-12 as compared with US$ 13.6 billion in Q4 of 2010-11.

The primary income account (mainly investment income) showed a net outflow of US$ 4.6 billion in Q4 of 2011-12, broadly the same as in the corresponding quarter of the previous year.

Consequently, the current account deficit (CAD) widened to US$ 21.7 billion in Q4 of 2011-12 which works out to 4.5 per cent of GDP (US$ 6.3 billion in Q4 of 2010-11 i.e., 1.3 per cent of GDP).

GoodReturns.in

Story first published: Saturday, June 30, 2012, 9:28 [IST]
Please Wait while comments are loading...
Company Search
Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'

Find IFSC