Business News

Current account deficit rises by 2.3% of GDP in first quarter, the widest gap in 4 years

It was 0.1% for the same quarter of April-June last year.

India’s current account deficit surged to $14.3 billion (approximately over Rs 9,000 crore), or 2.4% of the Gross Domestic Product, in the first quarter of the 2017-’18 financial year, according to data released by the Reserve Bank of India on Friday. This is the widest gap in four years, Bloomberg reported.

The current account trade deficit is a measurement of a country’s trade where the value of goods imported exceeds those it exported. There is a current account surplus when a country’s exports exceed its imports.

India’s trade deficit was at $0.4 billion (approximately Rs 250 crore), or 0.1% of the GDP, for the same quarter in 2016. In the last quarter of the 2016-’17 financial year, the deficit was $3.4 billion (approximately over Rs 2,000 crore), or 0.6% of the GDP.

The apex bank said that the widening of the current account deficit on a year-on-year basis was mainly because of a “higher trade deficit [of $41.2 billion] brought about by a larger increase in merchandise imports relative to exports”.

‘No surprise’

Investment Information Credit Rating Agency said in a statement that the sharp surge in the current account deficit is no surprise. The spike in gold imports before the introduction of the Goods and Services Tax is hugely responsible for this, the agency said.

“Moreover, the lagged impact of the INR appreciation was partly responsible for a faster rise in non-oil non-gold imports relative to exports, bloating the size of the merchandise trade deficit,” ICRA Pricipal Economist Aditi Nayar said. “However, the healthy 15% increase in the services trade surplus, modest increase in secondary income inflows and decline in primary income outflows shielded the current account deficit from an even larger deterioration.”

ICRA added that it expects the financial year deficit to double to around $30 billion (approximately over Rs 19,000 crore) for the financial year 2018.

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