India posts record current account deficit

AP News
Posted: Mar 28, 2013 11:37 AM

MUMBAI, India (AP) — India posted a record current account deficit of 6.7 percent of GDP in the quarter ending in December as once-healthy exports stalled and imports surged on high oil and gold prices, the country's central bank said Thursday.

The current account deficit widened to $32.6 billion during the quarter from $20.2 billion a year earlier, led by a large trade deficit, the Reserve Bank of India said.

The numbers were the latest discouraging economic news for Asia's third-largest economy. India's statistics agency has estimated total growth for the fiscal year that ends this month of 5 percent, the lowest level in a decade.

Large current account deficits can weaken a country's currency and also leave the economy vulnerable to external market downturns.

The central bank said merchandise imports grew by 9.4 percent, while merchandise exports "did not show any significant growth" over the same quarter the previous year.

In services, there was a net rise of 9.2 percent in the third quarter year-on-year on strong financial and software services.

Foreign direct investment declined to a net $2.5 billion in the third quarter, down from $5 billion a year earlier.

India has promised a raft of financial reforms to make it easier for foreign companies to do business in the country, but many investors have adopted a wait-and-see approach as elections approach next year.