Q3 FY13 current account deficit at record high of 6.7% of GDP

NEW DELHI: India's current account deficit (CAD) for the third quarter of the current financial year widened to a record high of 6.7 per cent of GDP as against 5.4 per cent in Q2. According to data released by the Reserve Bank of India ( RBI), the widening of the deficit happened on account of larger trade deficit.

"On a Balance of Payments (BoP) basis, merchandise exports did not show any significant growth in Q3 of 2012-13 as compared with a 7.6 per cent growth in Q3 of 2011-12," the central bank said. "Merchandise imports on the contrary registered a growth of 9.4 per cent, spurred largely by oil and gold imports," it added.

This resulted in the trade deficit widening to $59.6 billion in Q3 of 2012-13 from $48.6 billion in Q3 of 2011-12. With the surge in capital inflows, CAD during the quarter could be fully financed, explained RBI.

According to RBI, the pickup in capital flows was mainly due to foreign portfolio investment which rose to $8.6 billion during Q3 of 2012-13 from $1.8 billion in Q3 of previous year.

Commenting on the current account deficit, Bibek Debroy, Economist at Centre for Policy Research told ET Now that if the RBI decides not to cut policy rates in the coming quarters; it will be on account of the growth numbers as against a high CAD. Debroy also expects the CAD in Q4 of the current financial year to be better than Q3.

Tirthankar Patnaik of Religare Capital Markets expects that the indices may react negatively to this CAD number.

Meanwhile, the government's fiscal deficit touched 97.4 per cent of the budget estimates (BE) in the April-February period of the current fiscal.

In absolute terms, the fiscal deficit, or gap between expenditure and revenue receipts, stood at over Rs 5.07 lakh crore at the end of February, according to the data released by Controller General of Accounts (CGA).

The Government has estimated the fiscal deficit for current fiscal at Rs 5,13,590 crore, or 5.1 per cent, of GDP in the budget for 2012-13. However, in the revised estimate, it pegged the deficit to be at 5.2 per cent for the fiscal ending March 31.

The fiscal deficit rose from the budgeted levels due to the rising subsidy outgo. To contain it at 5.2 per cent, the government has taken a number of steps like rationalisation of expenditure including 10 per cent mandatory cut on non-plan expenditure.

Besides, steps have been taken to cut the subsidy outgo on petroleum products.