Q2 current account deficit sharply dips to 0.9% of GDP

Balance of Payments turn positive with addition to forex reserves

Raising hopes for easing curbs on gold imports, India's current account deficit (CAD) for third quarter (December 2013) dipped sharply to 0.9 per cent for gross domestic product ($ 4.2 billion) from 6.5 per cent of GDP ($ 31.9 billion) in Q3 ended December 2012 on pick up in exports and moderation in imports especially of yellow metal.

CAD was even lower than 1.2 per cent (5.2 billion) for the second quarter Q2 ended September 2013.

In tandem with distinct improvement on current account front, the balance of payments moved into positive territory. There was accretion of $ 19.1 billion to foreign exchange reserves in Q3 of 2013-14 as against meager accretion of $ 0.8 billion in Q3 of 2012-13. In July-September 2013, there was a drawdown of $ 10.4 billion.

For nine month period ended December 2013, the CAD was within Reserve Bank of India's comfort level of 2.5 per cent. For April-December 2013, the CAD was 2.3 per cent (31.1 billion) as against 5.2 per cent ($ 69.8 billion) in April-December 2012.

RBI sprung a surprise by releasing CAD and BOP data ahead of usual date for publication of information for second time in a row. Under normal schedule, RBI releases information for Q3 at the end of March. With better numbers to report, the Central bank had published data for second quarter (ended September 2013) in Early December 2013.

RBI said the lower CAD in Q2 was primarily on account of a decline in the trade deficit as merchandise exports picked up and imports moderated, particularly gold imports, RBI said in a statement.

Earlier in the day Union Finance Minister P Chidambaram had said that the government will take a call on further easing curbs on gold imports after looking at CAD data.

The merchandise exports rose by 7.5 per cent to $ 79.8 billion in Q3 of 2013-14. The growth was significant especially in the exports of engineering goods, readymade garments, marine products' and chemicals.

The picture of import front was different. The merchandise imports declined by 14.8 per cent in Q3 of Fy14 to $ 112.9 billion compared to increase of 10.4 per cent in Q3 of FY13. The gold imports in Q3 declined sharply to just $ 3.1 billion $ 17.8 billion a year ago.

On services trade front, Net services at $ 18.1 billion posted a growth of 8.9 per cent in Q3 of 2013-14 (y-o-y).

Net outflow due to primary income (profit, dividend and interest) was lower at $ 5.4 billion in Q3 of 2013-14 as against $ 5.8 billion in Q3 of Fy13. Gross private transfer receipts rose by 4.8 per cent to $ 17.3 billion.