By Shamik Paul and Suvashree Dey Choudhury
MUMBAI (Reuters) - India's current account deficit hit a record high 4.8 percent of gross domestic product in the fiscal year that ended in March, fuelled by rising imports of oil and gold, but was lower than an expected gap of 5 percent, giving a boost to the battered rupee.
While economists expect the current account deficit to widen in the June quarter due to a sharp increase in gold imports during April and the first half of May, they expect it to narrow for the full fiscal year that started in April as government measures to curb gold demand take effect.
The current account data was released a day ahead of schedule and a day after the Indian currency touched a record low of 60.76 to the dollar. The data helped lift the rupee as high as 60.19 to the dollar in Thursday trade.
The rupee's fall has rattled foreign investors and - if outflows persist - could make it harder to fund the current account deficit from portfolio inflows.
"Right now, stemming the capital outflows is a bigger challenge," said A. Prasanna, economist at ICICI Securities Primary Dealership.
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For the fiscal year ended in March, India had a balance of payments surplus of $3.83 billion, compared with a deficit of $12.8 billion a year earlier. The swing to surplus was thanks to robust capital inflows, and economists note that India is in far better shape than during a balance of payments crisis of 1991.
"Talk of a repeat of the 1991 BOP crisis are premature. High fx reserves do at least buy the country plenty of time," Robert Prior-Wandesforde of Credit Suisse wrote on Thursday.
Net inflows were strong enough to finance the March quarter current account gap, helping to deliver a balance of payments surplus of $2.68 billion for those three months, compared with a $5.7 billion deficit a year earlier.
The early release of the data, scheduled to be published late on Friday, was widely seen as an effort to calm market worries over the plunging rupee, the worst-performing Asian currency in June. In 2013, the rupee has lost more than 9 percent against the dollar.
COMBATTING DISCOMFORT?
"I think there was a clear motivation on the part of the RBI to put the market at ease. It shows they were uncomfortable at the recent sell-off, and perhaps, this is the best way to combat that," said Jyotinder Kaur, economist at HDFC Bank.
The current account gap for the full fiscal year ending in March was $87.8 billion, up from $78.2 billion a year earlier.
For the January-March quarter, India's current account deficit narrowed from the record 6.7 percent in the previous quarter, as non-oil and non-gold imports fell due to slowing economic growth. The decline from the December quarter was the first sequential drop in nearly two years.
The current account gap in the March quarter was $18.1 billion, or 3.6 percent of GDP, lower than the 4.4 percent gap forecast in a Reuters poll of economists and below the $21.7 billion deficit a year earlier.
"Essentially non-oil, non-gold components of imports showed a decline, reflecting slowdown in domestic economic activity," the Reserve Bank of India said in a release.
India, the world's biggest gold buyer, has announced a slew of measures to curb demand for the yellow metal, which accounts for about 11 percent of overall imports.
Last month, the government raised the import duty on gold to 8 percent from 6 percent and the RBI placed curbs on banks on lending against gold and gold jewellery.
India's financial account, which includes foreign direct investment, portfolio investment and overseas borrowing by Indian companies, showed a surplus of $17.6 billion in the March quarter, compared with $22.4 billion a year earlier.
For the full year that ended in March, net inflows under the financial account rose to $85.4 billion from $80.7 billion. (Additional reporting by Mumbai Treasury Team; Editing by Tony Munroe and Richard Borsuk)