Graphic: Subrata Jana/Mint  (Subrata Jana/Mint)
Graphic: Subrata Jana/Mint (Subrata Jana/Mint)

India’s current account deficit almost doubles from a year ago

With lower oil prices in the current quarter, trade deficit is likely to fall, although export growth is tepid

India’s current account balance for October-December quarter was almost double that for the corresponding period of 2013, as the chart shows. As a percentage of gross domestic product (GDP), it was 1.6%, against 0.9% during October-December 2013. Note that the merchandise trade deficit widened, despite a much smaller petroleum import bill. That’s because export growth was lower, but more importantly, other imports also rose. As the chart shows, it was services exports that saved the day. Other items, such as primary income (profits, interest, dividends) and secondary income (remittances) were more or less the same.

With lower oil prices in the current quarter, trade deficit is likely to fall, although export growth is tepid. Madan Sabnavis, chief economist at CARE Ratings, says, “CAD (current account deficit) for the year would be in the range of 1.5-1.7% for the full year as the denominator, i.e. GDP at current market prices, has also come in lower under the new calculation of GDP."

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