In what may be a relief to policy makers and the government, India's current account deficit dropped (CAD) to 3.9 per cent of the GDP in first quarter of 2012-13 as against a record high of 4.5 per cent in the previous quarter (January-March).

The drop in the current account deficit is largely on account of a drop in imports.

"During Q1 of 2012-13, a moderation in trade deficit due to sharper decline in imports as compared with exports coupled with improvements in secondary income, led to decline in current account deficit (CAD) in absolute terms as compared with Q1 of the previous year. However, as a proportion of GDP it rose to 3.9 per cent as compared with 3.8 per cent in Q1 of the previous year. It reflected the fall in the growth of GDP and rupee depreciation of about 17 per cent against US dollar over the corresponding quarter," the RBI has said in a release.

Over the last few quarters, the current account deficit, along with the fiscal deficit has been a cause for concern. With the sharp gains in the rupee, the current account deficit might continue to reduce even further.

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