India's Q3 current account deficit shrinks to $4.2 billion

Updated: Thursday, March 6, 2014, 8:48 [IST]

India's current account deficit for the quarter ending Dec 31, 2013, shrank significantly to just $4.2 billion, thanks to rising exports and falling imports.

It narrowed to $31.1 billion (2.3 per cent of GDP) in April-December 2013 from $69.8 billion (5.2 per cent of GDP) in April-December of 2012.

The reduction, RBI said, was due to contraction in the trade deficit, coupled with a rise in net invisible receipts.

In his interim budget speech, Finance Minister P Chidambaram had said the year-end CAD will be contained at $45 billion, well below the record high level of $88 billion in 2012-13.

The sharp drop in imports was one reason for the fall in the current account deficit. Imports at 1$12.9 billion, recorded a decline of 14.8 per cent in Q3 of 2013-14 as against an increase of 10.4 percent in Q3 of 2012-13.

Gold imports dropped sharply to just $3.1 billion as compared to $17.8 billion in Q3 of 2012-13 and $3.9 billion in Q2 of 2013-14.

Exports rose 7.5 per cent to $79.8 billion during October-December 2013 period as engineering goods, readymade garments and chemicals contributed significantly to the growth.

The rupee may gain significantly today on the back of the falling current account deficit numbers. In the month of Sept last year, the rupee hit a record low against the dollar of 68.81 after panic spread following reports of the US Fed planning to taper off its QE3 programme.

This was largely on account of the high current account deficit. Read all about CAD and its relation to the currency here

With inputs from PTI