India's balance of payment turns negative in October-December 2011

India's balance of payment (BoP) turned negative during the three months ended 31 December 2011 as the country's current account deficit widened and dollar inflows ebbed.

The country's balance of payments showed a deficit of $12.8 billion in the October-December quarter, against a surplus of $4 billion in the previous year quarter.

The widening of BoP has been due mainly to rising current account deficit in the wake of a decline in exports and rising imports, as also a weakening of capital flows to the country.

The country's current account deficit (CAD) widened to $19.6 billion in Q3 of 2011-12 against $10.1 billion in Q3 of 2010-11. Current account deficit of the country for the October-December 2011-12 quarter works out to 4.3 per cent of GDP against 2.3 per cent of GDP in Q3 of 2010-11.

''During Q3 of 2011-12, India's BoP experienced a significant stress as trade deficit widened and capital inflows fell far short of financing requirement resulting in significant drawdown of foreign exchange reserves,'' the Reserve Bank of India (RBI) said in a release.

This is the first time that the balance of payment turns negative after it declined in the December quarter of 2008, soon after the 2007 global financial crisis.