India’s current account deficit was narrower than expected at $21.8 billion, or 4.9 per cent of gross domestic product, in the June quarter, data released on Monday showed.
Still, it was wider than the $18.17 billion, or 3.6 per cent of GDP, in the three months ending in March, on a seasonal slowdown in exports and firm imports. Five economists had predicted the June quarter current account deficit (CAD) would rise to $23-$25 billion.
However, economists expect the gap to ease in subsequent quarters as government steps to increase the import duty on gold have constricted imports of the metal, while improving global demand and a weaker Indian currency are expected to help exports.
India’s balance of payments slipped marginally into deficit for the June quarter at $346 million versus a surplus of $2.68 billion in March quarter.
India’s financial and capital account, which includes foreign direct investment, portfolio investment and overseas borrowing by Indian companies, was a surplus of $20.8 billion in the June quarter compared with a surplus of $17.8 billion in the March quarter.
India’s high current account gap has made the country especially vulnerable to a surge in capital flows out of emerging markets in recent months, sending the rupee down as much as 20 per cent this year to a record low on Aug 28, although it has since recovered some of that ground.