India's current account deficit widened to a record level in the January to March period due to imports climbed more than exports, data released by the Reserve Bank of India revealed Friday.
The ballooning current account deficit left the balance of payments in deficit for the second quarter in a row, putting pressure on the already stressed external position of the country.
"While capital inflows improved reflecting significant increase in portfolio investment and non-resident deposits, they fell short of financing requirements, resulting in a drawdown of foreign exchange reserves," the central bank said.
Economists expect India's external position to improve in coming months owing to a weaker currency and falling oil and gold prices.
The current account deficit for the March quarter was $21.7 billion or 4.5 percent of GDP, compared to $6.3 billion or 1.3 percent shortfall a year ago. In the October-December period, the deficit was $19.6 billion.
The drawdown of foreign exchange reserves during the quarter was $5.7 billion compared to an increase of $2.0 billion in the corresponding quarter last year. The difference in was mainly because of the deterioration in the current account, the bank said.
Trade deficit widened to $51.6 billion from $30 billion last year. Merchandise exports growth fell sharply to 3.4 percent from 46.9 percent. Imports grew 22.6 percent, slightly less than 27.7 percent gain a year ago.
For the fiscal year 2011-12, the current account gap was also a record $78.2 billion or 4.2 percent of GDP compared to $46 billion or 2.7 percent in 2010-11.
The rise in CAD-GDP ratio was also resulted from slower GDP growth and its contraction in dollar terms due to depreciation of rupee, the bank noted.
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