India's current account deficit (CAD) widened from 5.4 per cent in the July-September quarter to a record high of 6.7 per cent of GDP in the October-December quarter, driven mainly by huge trade deficit, said a release by the Reserve Bank of India. This is much higher than the 6.4 per cent estimated by a CNBC-TV18 poll.
A surge in capital flows helped finance the current account deficit. "The pickup in capital flows was mainly due to foreign portfolio investment which rose to $8.6 billion during Q3 of 2012-13 from $1.8 billion in Q3 of previous year. While loans availed by banks and corporate sector amounted to $7.1 billion, net Foreign Direct Investment (FDI) declined to $2.5 billion in Q3 of 2012-13 from $5 billion in the corresponding quarter of 2011-12," the RBI release said.
Exports growth during the third quarter was muted as compared with a 7.6 per cent growth in Q3 of 2011-12, the RBI release said. Imports, however grew 9.4 per cent, spurred largely by oil and gold imports. This has resulted in the trade deficit widening to $59.6 billion in Q3, compared to $48.6 billion during the corresponding period of the previous year.