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July-Sept current account deficit at 4-year high on rising oil prices: RBI

India's trade deficit in July-September widened to $50 billion from $32.5 billion a year ago

Reuters  |  Mumbai 

current account deficit
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High oil prices pushed India's in July-September to its widest in over four years, according to data released by the central bank on Friday.

However, the is likely to fall due to a sharp drop in that will take pressure off a depreciating rupee, analysts said.

"The has peaked," said Shubhada Rao, chief economist at Yes Bank in Mumbai.

The Indian fell 14 per cent in the first nine months of 2018 but has recovered by 5.6 per cent since October on the back of the drop in oil prices.

The current account deficit in July-September hit 2.9 per cent of gross domestic product or $19.1 billion, the highest since April-June quarter of 2013. In July-September 2017 the current account deficit was $6.9 billion or 1.1 per cent of GDP, Reserve Bank of India data showed.

India's in July-September widened to $50 billion from $32.5 billion a year ago. Overall, India's was in deficit to the tune of $1.9 billion in the September quarter, compared with a surplus of $9.5 billion a year ago.

"Going ahead, an improvement in the current account deficit, along with some degree of capital inflows, will ease the pace of depreciation in the However, we are riding a political cycle, the outcome of which will have some bearing on the rupee," Yes Bank's Rao said.

The bank has lowered its current account deficit projection for the full financial year 2018/19 to 2.3 per cent of GDP from 2.9 per cent, while deficit is expected to be at $12 billion, Rao said.

Oil prices have slumped by more than 30 per cent since early October, pressured by concerns supply will exceed demand in 2019 as economic growth slows.

India imports two-thirds of its oil needs and the sharp oil price fall will reduce its trade deficit, ease inflation and boost the and improve overall macroeconomic fundamentals, according to analysts.

However, investors will also be keeping an eye on the outcome of the key state elections due out on Tuesday for cues on the general elections scheduled by May.

Indian Prime Minister Narendra Modi's ruling nationalist is set to lose two heartland states - Rajasthan and Chhattisgarh while the third is too close to call, exit polls showed on Friday in the final test of popularity before the national election in mid-2019,

First Published: Fri, December 07 2018. 20:52 IST