India's Current Account Deficit Widens for the April-June Period

For the quarter ended June 2018, India's current account deficit (CAD) widened to a four-quarter high of 2.4 percent of the GDP (gross domestic product) at $15.8 billion, an RBI statement on Friday said. It is higher than January-March 2018 quarter's 1.9 percent.

In a year ago period, the CAD stood at $15 billion or 2.5 percent of the GDP. The Reserve Bank of India (RBI) said that the widening of CAD on a year-on-year basis was due to a higher trade deficit of $45.7 billion as against $41.9 billion last year. The major blow to the trade deficit was the high crude oil prices in the month of May when international benchmark Brent crossed $80 a barrel mark.

The widening gap in the deficit is the main reason for rupee's fall that hit a new all-time low of 72.10 against the dollar this Thursday and closed at 71.73 on Friday. The recovery comes from the RBI's heavy dollar sale on Friday. The central bank has reduced foreign reserves worth $26 billion since April this year to support the Indian currency.

Expectations of another interest rate hike by the US Federal Bank in its upcoming monetary policy meet, weakness in the emerging markets and high crude oil prices have kept the currency under pressure.

The RBI statement said that in the quarter under review, a net outflow of $8.1 billion was seen in foreign portfolio investments, compared to inflows of $12.5 billion in June 2017. The outflows are mainly from net sales in debt and equity markets.