India’s current account deficit, the excess of imports of goods and services over their exports, widened to 2% of GDP in the third quarter as oil prices rose and inbound shipments of electronics surged, likely dealing a blow to an already weakening rupee.
The deficit touched $13.5 billion in the three months ended December from $8 billion, or 1.4% of GDP, a year earlier and $7.2 billion (1.1% of GDP) in the preceding quarter.
The data showed the CAD widened due to a higher trade deficit of $44.1 billion on account of an increase in merchandise imports, mainly crude oil and other petroleum products, which accounted for more than 40% of India’s overall merchandise import bill. Crude oil prices have risen by over $10 a barrel between December 2016 and December 2017. Of late, there has been a surge in electronics imports as well.
Net services receipts increased by 17.8% from a year earlier on the back of a rise in earnings from software services and travel receipts. Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $17.6 billion, an increase of 16%.
In the capital account, while net foreign direct investments at $4.3 billion were lower than $9.7 billion a year earlier, portfolio investments recorded a net inflow of $5.3 billion as against an outflow of $11.3 billion in Q3 last year on account of net purchases in both the debt and equity markets.Net NRI deposits amounted to $3.1 billion as against net repayments of $18.5 billion a year ago.
The overall balance of payments, including the position in the current account and the capital account, ended in a surplus of $9.4 billion on account of a $22 billion surplus in the capital account.