India's Oct-Dec current account deficit widens to 2.7% of GDP

India's current account deficit widened in the three months to December, mainly on the back the higher trade deficit, the Reserve Bank of India said on Thursday.

The country's current account deficit (CAD) stood at $23 billion or 2.7% of GDP in the third quarter of fiscal year 2021/22, compared with a deficit of $2.2 billion or 0.3% of GDP as year earlier.

In the preceding quarter, the shortfall stood at $9.9 billion or 1.3% of GDP, RBI data showed.

"We expect the current account deficit to recede somewhat in Q4FY22, to around $17-$21 billion, with the third wave temporarily curtailing certain imports," said Aditi Nayar, chief economist at ICRA, referring to a surge in coronavirus infections.

The central bank said net services receipts increased both sequentially and on year-on-year basis on the back of the robust performance of net exports of computer and business services.

Private transfer receipts, mainly remittances by overseas Indians, rose 13.1% on the year, while net foreign direct investment showed an inflow of $5.1 billion, lower than $17.4 billion in the same quarter a year ago.

The country's balance of payments stood at a small surplus of $0.5 billion in the third quarter of the financial year, compared with a surplus of $32.5 billion a year earlier.

"If the ongoing geo-political tensions between Ukraine and Russia push up the average price of the Indian crude oil basket in FY2023 to $105/barrel, then the CAD (current account deficit) is projected to widen to $90-95 billion," Nayar said.