30-Sep-2013
India’s current-account deficit widened less than economists estimated in the second quarter after the government tightened curbs on gold imports to tackle a shortfall that’s weighed on the rupee.
The deficit was $21.8 billion in April through June, compared with $18.1 billion in the previous quarter, the Reserve Bank of India said in a statement in Mumbai yesterday. The median of 26 estimates in a Bloomberg News survey was for a $23 billion gap. The current account is the broadest measure of trade, tracking goods, services and investment income.
The monthly trade deficit has almost halved since May as higher gold-import taxes deter inward shipments of a metal used in India for everything from wedding jewelry to hedging against inflation. The government aims to pare the current-account imbalance from a record $87.8 billion in the fiscal year ended March, part of efforts to support a currency that’s weakened 12 percent versus the dollar in 2013.
“Concerns over deficit financing are alleviating due to improvement in the trade deficit in recent months and steps by the central bank to boost dollar inflows,” said Tirthankar Patnaik, a strategist at Religare Capital Markets Ltd. in Mumbai. The current-account gap will narrow to $55 billion this financial year, easing pressure on the rupee, he said.
The rupee weakened 0.2 percent to 62.6175 per dollar at the close in Mumbai yesterday. The S&P BSE Sensex index of stocks fell 1.8 percent. The yield on the 10-year note due May 2023 rose to 8.77 percent from 8.71 percent on Sept. 27. The currency appreciated about 4.9 percent last month, helped by RBI Governor Raghuram Rajan’s efforts to attract dollars.
The government has boosted levies on gold bullion bought from abroad thrice in 2013 to 10 percent, most recently in August. Finance Minister Palaniappan Chidambaram said the same month that India intends to compress imports of gold, silver and some non-essential items, as well as demand for crude oil.
India’s imports fell for three straight months through August. Exports (INMTEXUY) climbed 13 percent that month from a year earlier and the merchandise trade deficit narrowed to $10.9 billion, from $20.1 billion in May.
The current-account gap for 2013-2014 may be less than $60 billion and the depreciation in the rupee is probably helping overseas sales to some extent, according to Barclays Plc.
The current-account deficit was 4.9 percent of gross domestic product in April through June, yesterday’s report showed. The central bank estimates the sustainable level is about 2.5 percent of GDP.
India’s budget deficit in the first five months of the fiscal year reached 74.6 percent of the target for 2013-2014, another release showed.
Prime Minister Manmohan Singh’s second term in office has been marred by graft scandals, average consumer-price inflation of about 10 percent in the past year and slumping economic growth. HSBC Holdings Plc predicts expansion will slow further to 4 percent in 2013-2014.
Source:- bloomberg.com
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