Current account deficit at historic high a concern: Goldman

Global financial powerhouse Goldman Sachs today said the high current account deficit at $15.8 billion remains the biggest risk to India's growth story.

India's current account deficit (CAD), representing net flow of income out of the country barring capital movements, surged 72 per cent to $15.8 billion in the July-September quarter over the same period last year.

"The high deficit number supports our view that rising current account deficit being financed by short term capital flows remains the biggest risk to India's growth story," Goldman Sachs said in a research note.

During the September quarter the CAD accelerated to a historic high of 4.1 per cent of GDP, higher than 3.2 per cent of GDP in the previous quarter, Goldman Sachs said.

"In the past decade, the only other quarter in which the current account deficit has been so high is during the crisis quarter of September 2008," the research note said.

Capital inflows remained robust during the second quarter due to higher external commercial borrowings (ECBs) by India Inc and external assistance in the July-September period.

India received USD 18.8 billion of foreign institutional investment on net basis in July-September, against $7.0 billion in the year-ago period.

The net outflow of money on current account was, however, more than offset by inflow on capital account, despite moderation in FDI.

Higher capital inflows were due to higher investment in capital markets by foreign funds, external commercial borrowings by India Inc and external assistance, the data showed.

However, foreign direct investment fell to $2.5 billion during July-September from $7.5 billion in the year-ago period.