India’s Current Account Deficit Remains Unchanged in Q3
India’s current account deficit remained largely unchanged in the July-September quarter, standing at $11.2 billion, or 1.2% of the country’s gross domestic product (GDP). The figure is close to the revised gap of $11.3 billion for the April-June period.
The Reserve Bank of India (RBI) attributed the deficit to strong domestic demand, particularly for gold, which led to an increase in the country’s import bill. Gold imports saw a significant increase after the government reduced the duty on the metal from 15% to 6% in July. The trade deficit widened unexpectedly in August due to a slowdown in global demand affecting exports.
The RBI warned that the current account deficit is expected to widen significantly in the October-December quarter, following India’s trade deficit reaching a record high in November, fueled by a fourfold increase in gold imports. However, there are concerns that the amount of gold imported for the month may have been overestimated.
The widening deficit is putting additional pressure on the Indian rupee, which fell to a record low of 85.8150 against the US dollar on Friday. The RBI’s ongoing efforts to halt the rupee’s decline have led to a depletion of over $50 billion from the country’s foreign exchange reserves since its peak of approximately $705 billion in September.
In the July-September quarter, the trade gap rose to $75.3 billion, up from $64.5 billion a year ago. Meanwhile, net services exports increased to $44.5 billion in the quarter, up from $39.9 billion in the same period the previous year.
