India's current account deficit in the July-September quarter remained virtually unchanged from the previous quarter, according to data released by the Reserve Bank of India (RBI) on Friday. The deficit, a broad measure of trade in goods and services, stood at $11.2 billion, or 1.2% of the country's gross domestic product (GDP) for the quarter. The figure is close to the revised deficit of $11.3 billion for the April-June period, which was initially reported as a deficit of $9.7 billion.
The RBI said strong domestic demand, especially for gold, had led to an increase in the country's import bill during the period. This is a typical trend as bills usually rise ahead of the Diwali festival season. The trade deficit unexpectedly widened in August due to slowdown in global demand, which impacted exports. On the other hand, gold imports increased significantly after the government reduced duty on the metal from 15% to 6% in July.
The central bank also warned that the current account deficit is expected to widen significantly in October-December. This comes after India's trade deficit hit a record high in November, fuelled by a four-fold increase in gold imports. However, there are concerns that the amount of gold imported for the month may have been overestimated. Efforts are underway to reconcile the data.
The widening deficit is putting further 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 stem the rupee's slide have drained more than $50 billion from the country's foreign exchange reserves from a peak of about $705 billion in September.
The trade deficit widened to $75.3 billion in the July-September quarter from $64.5 billion a year earlier, according to RBI data. Meanwhile, net services exports rose to $44.5 billion in the quarter from $39.9 billion in the same period a year earlier.
