Current account deficit doubles to $8.2 bn in Q3; analysts see better data ahead

The current account deficit (CAD) doubled to $8.2 billion or 1.6 per cent of the GDP during December quarter on year-on year basis, despite an improvement from the preceding quarter level, according to RBI data released on Tuesday.

During October-December period of last fiscal, the CAD -which is the gap between foreign exchange earned and spent-stood at $4.2 billion or 0.9 per cent of GDP.

On sequential basis, however, the CAD narrowed from $10.1 billion or 2 per cent of GDP in the September quarter.

It has narrowed to 1.7 per cent for the first nine months of the current fiscal, driven down by lower oil prices and higher services exports that offset the dip in merchandise shipments.

Analysts have, however, have already pencilled in a current account surplus of over 1.5 per cent of GDP in the March quarter on account of the massive fall in crude prices and also other commodities. Crude at present is trading around 40 per cent lower than last year's.

According to the Reserve Bank data, in the April-December period of last fiscal, CAD stood at $31.1 billion or 2.3 percent of GDP.

Many analysts are of the opinion that the continuing decline in crude prices will see the country posting a current account surplus in the current March quarter, which would be the first surplus since the March quarter of 2007.

This would also mark a smart turnaround from the record high CAD of 4.8 per cent of GDP in FY 2013, which sparked the country's worst currency crisis in more than two decades.

Meanwhile, the RBI data showed that the balance of payments stood at a surplus of $13.2 billion during December quarter, which is a fifth consecutive quarter of surplus.

Similarly, the capital and financial account was also in surplus at $10 billion, according to the data.

"The quarter-on-quarter decline in CAD is a positive surprise," Aditi Nayar, senior economist with rating agency Icra, said.

A higher services surplus, lower outflows of primary income and smaller net oil imports offset the considerable rise in gold imports between second and the third quarter, she added.