March 29, 2019 / 2:08 PM / in a year

India Oct-Dec current account gap, balance of payments weaken on-year

A cashier checks Indian rupee notes inside a room at a fuel station in Ahmedabad, India, September 20, 2018. REUTERS/Amit Dave/File Photo

MUMBAI (Reuters) - India’s key external parameters weakened in October-December on higher imports and dollar outflows, pushing the current account deficit wider and balance of payments into the red from the previous year, Reserve Bank of India data showed on Friday.

The current account deficit stood at $16.9 billion or 2.5 percent of the gross domestic product in the December quarter, compared with $13.7 billion or 2.1 percent a year ago on the back of widening trade deficit worth $49.5 billion.

Balance of payments, which represent the difference between current account and capital account, slipped into a deficit of $4.3 billion in the December quarter from a surplus of $9.4 billion a year ago, data showed.

However, the numbers are expected to get better going ahead as dollar inflows have turned robust on expectations of Prime Minister Narendra Modi winning a second term at the general elections that start next month.

“Foreign portfolio outflows pressured BOP as well, even as pressures on current account deficit as well as capital account have eased appreciably lately,” said Abhishek Upadhyay, senior economist, ICICI Securities Primary Dealership in Mumbai.

Stable oil prices are also expected to ease the current account deficit in future and boost the rupee exchange rate, which was one of the worst performer in Asia in 2018 dented by a surge in oil prices.

“Soft interest rates globally and expectations of a stable government post elections in India are expected to keep the foreign direct inflows and portfolio inflows strong, which will keep the rupee stable,” said Shubhada Rao, chief economist, YES Bank in Mumbai.

The rupee has gained 2.2 percent in March, its highest since November on the back of strong dollar inflows into equities. The rupee has firmed by 0.90 percent so far this year, recovering most of its lost ground from last year.

The capital account surplus dived to $13.6 billion in October-December from $16.7 billion in July-September period.

Editing by Sherry Jacob-Phillips

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