Showing the effect of a worsening global trading environment, India’s current account deficit (CAD) shot up to 4.3 per cent of gross domestic product (GDP) for the third quarter ended December 2011 from 2.3 per cent for the same quarter in 2010.
With export growth lagging import growth, the trade deficit for October-December 2011 widened to $47.7 billion from $31.4 bn in Q3 last year, according to Reserve Bank of India data.
Sonal Verma, economist with Nomura Financial and Securities, said a sharp slowing in exports due to the European sovereign debt crisis and an elevated import bill due to rising oil and gold imports widened the trade deficit.
In absolute terms, CAD for the third quarter of FY12 was $19.6 bn, up from $10.1 bn in Q3 of FY11. During the nine months ended December 2011, CAD rose to $53.7 bn (four per cent of GDP) from $39.6 bn (3.3 per cent of GDP).
It reflected the trade deficit due to import of oil, gold and silver, whose prices have been high.
The effect of economic slowdown was also visible on activities in the services sector. Services receipts declined 5.4 per cent to $36.7 bn from $38.8 bn in Q3 of 2010-11.
Services payments were also down, by 17.5 per cent to $21.7 bn from $26.3 bn. Net services exports were higher at $15 bn in Q3 of 2011-12 over $12.5 bn in October-December 2010, mainly reflecting improvement in net software exports.
Private transfers rose 30.6 per cent to $17.5 bn in Q3 over $13.4 bn a year before. Invisibles remained robust, owing to strong software services and private remittances, but were not sufficient to offset the higher trade deficit, Verma added.
The investment income showed a net outflow of $4.5 bn in Q3 of 2011-12, broadly the same as in the corresponding quarter of the previous year.