India’s Current-Account Gap Holds Near 2014 High as Exports FallSandrine Rastello
India’s current-account deficit held near the widest since the quarter through June 2013 as falling oil prices were insufficient to offset a drop in exports.
The October-December shortfall in the broadest measure of trade was $8.2 billion compared with $10.2 billion the previous quarter, the Reserve Bank of India said in a statement on Tuesday. While that was smaller than the $11.15 billion median estimate in a Bloomberg survey of 12 economists, the gap amounts to 1.6 percent of gross domestic product, wider than the central bank’s forecast of 1.3 percent for the year through March.
“The outlook for exports” is still quite bleak, Aditi Nayar, a senior economist at ICRA Ltd. near New Delhi, said in interview to Bloomberg TV India. “At this point in time certainly we do expect a substantial improvement in the current-account deficit going ahead but that primarily predicates on commodity prices remaining low and not some inherent improvement in Indian exports.”
The 46 percent drop in oil prices over the past year is capping import costs for the Asia’s third-largest importer while a global slowdown damps demand for the nation’s exports. A predicted pick-up in growth to the fastest pace among major economies risks spurring demand for overseas products.
The rupee briefly extended losses in the offshore market to the day’s low of 63.31 a dollar soon after the data, before trading at 63.26 as of 12:35 p.m. in London. Local markets had shut earlier.
India’s trade deficit widened to $39.2 billion during the quarter from the previous three months as exports fell 7.3 percent while imports declined 4.5 percent. Gold shipments are seen surging after the government last month refrained from raising a record tariff.
About $13.2 billion was added to India’s foreign exchange reserves, almost double the accretion in the preceding quarter but lower than the year-ago figure that was bolstered by a special deposit facility for Indians living abroad and foreign borrowings.