India’s trade deficit narrows in Q4; but still at record highs

27 Jun 2013

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India's trade deficit narrowed down to 3.6 per cent of the gross domestic product in the January-March quarter of the previous fiscal; but at the same time it rose to a record 4.8 per cent for the full 2012-13 year.

"The current account deficit (CAD) moderated sharply to 3.6 per cent of GDP in Q4 of 2012-13 from a historically high level of 6.7 per cent of GDP in Q3 of 2012-13 as trade deficit narrowed," the Reserve Bank of India said in a statement from Mumbai.

The moderation in CAD was due to non-oil and non-gold imports falling due to slowing economic growth, it said.

The CAD in the quarter was $18.1 billion, or 3.6 per cent of GDP; lower than the $21.7 billion deficit in the same period a year earlier.

"Essentially non-oil, no-gold components of imports showed a decline, reflecting slowdown in domestic economic activity," RBI said.

During 2012-13, CAD stood at $87.8 billion (4.8 per cent of GDP) as against $78.2 billion (4.2 per cent of GDP) during 2011-12.

The finance ministry said in a statement, "The short-term increase or decrease in CAD should not be a cause for either optimism or pessimism. "We must look at the end of the year where the CAD stands.

"Markets have been overreacting, as we have seen in the case of prediction for CAD last year, which were much higher than 5 per cent; and we have seen that it is much lower than 5 per cent," the Ministry said.

(See: Rupee recovers a bit as CAD position improves)

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