India’s current account deficit at three-year low for 2013

NEW DELHI - Underscoring India's strengthening external balances, the 4Q13 current account deficit eased sharply to -0.9% of GDP,  its lowest since March 2009, from -1.2% in the previous quarter and -6.5% in 4Q12.

Concerted policy action to curb non-essential imports such as gold through customs duty hikes and tighter lending norms, alongside weak domestic demand and a pick-up in exports, have helped improve India's 2013 current account deficit to its lowest in three years at -2.6% of GDP from -5.0% in 2012. 

Meanwhile, India's balance of payments position turned positive in Q4 (+US$19 billion vs –US$10.4 billion in 3Q13) as RBI's unconventional measures, especially the  special interest rate swap facility to attract dollar deposits by non-resident Indians, helped buoy the capital account ( +US$23.8 billion vs –US$4.8 billion in 3Q13).

Looking ahead, BBVA Bank says it expects India's current account deficit to moderate further in 2014 (to 2.5% of GDP) as global growth gains traction and domestic demand stays weak amid a tight monetary policy backdrop. www.bbvaresearch.com (ATI).