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Imports, oil bill raised deficit before conflict

MUMBAI: Rising imports and high oil prices have taken their toll on India’s current account deficit (CAD) even before the Russian invasion of Ukraine. The quarter ended December 2021 saw India’s CAD widen to $23 billion, or 2.7%, of the country’s gross domestic product (GDP).
Releasing the data, the Reserve Bank of India (RBI) said that the widening current account gap was due to pressures on trade deficit, which swelled to $60 billion because of rising imports. Given that prices of crude and international commodities shot up in the fourth quarter significantly, the CAD is expected to get much worse.
The trade deficit, on account of petroleum products, was $26 billion as compared to $16 billion in the corresponding quarter of previous fiscal. The overall deficit due to trade in goods was $60 billion as against $34.6 billion in the third quarter of previous year. Gold imports during the quarter moderated to $14 billion from $16 billion in the preceding quarter.
The deficit was at $9.9 billion, or 1.3% of the GDP, in the second quarter of this fiscal while the same stood at $2.2 billion, or 0.3%, of the GDP in the year-ago period, the data on Balance of Payments showed. For the first nine months of the year, the CAD stood at 1.2% of GDP as against 1.7% in the same period in the previous financial year.
In the first nine months of FY22, net invisible receipts were higher on account of increased net receipts for services and private transfers. Remittances by overseas workers were up at $13.7 billion during the quarter from $12.3 billion in the preceding quarter of previous year. Net FDI inflows at $26.5 billion in April-December 2021 were lower than $41.3 billion in April-December 2020. Portfolio investment recorded a net outflow of $1.6 billion during April-December 2021 as against an inflow of $28.9 billion a year ago.




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