India's c/a, fiscal deficit widen, outlook gloomy

By Saikat Chatterjee and Rajkumar Ray

MUMBAI/NEW DELHI (Reuters) - India's current account deficit swelled to a record $12.54 billion in the September quarter and analysts warned on Wednesday it could balloon further as the world economy slows, putting pressure on the rupee.

The government's fiscal deficit also widened in the first eight months of the 2008/09 fiscal year, and analysts said it was on course to overshoot its target due to extra spending and a slowdown in revenue collections from sagging domestic growth.

The rupee has lost 19 percent against the dollar this year, its worst performance since a balance of payments crisis in the early 1990s, due to a rising oil import bill and foreign fund outflows from the share market amid the global financial crisis.

"The third quarter numbers are going to be much worse as, though there will be lower merchandise and current account deficits due to falling global commodity prices, we may see a capital account shortfall," said Sujan Hajra, economist at Anand Rathi Securities in Mumbai.

The overall balance of payments fell into deficit for the first time in three years. The BOP deficit in the July-September quarter stood at a quarterly record of $4.73 billion, compared with a revised surplus of $29.24 billion in the year-ago quarter.

The current account deficit stood at $4.3 billion in same period a year earlier and $9.79 billion in the prior three months of 2008/09, according to central bank data.

"The picture is likely to get gloomier as export growth has slowed sharply and remittances from software receipts are showing signs of a slowdown," said an economist at a foreign bank who did not wish to be named.