FM says market over reacting to current account deficit

Indian markets are being too pessimistic about the current account deficit, the finance ministry said on Thursday, after data earlier showed the gap had been lower than expected.

Concerns about the current account deficit have been a key factor behind the rupee's slump to a record low of 60.76 to the dollar on Wednesday.

Also read: CAD sharply lower, but external debt up15%: StanChart

"We do certainly believe that (the) market is over reacting. And this is evident from the fact (that) it over reacted by anticipating a much higher CAD for the entire last year," the Finance ministry said in a statement to reporters.

The statement was meant to further explain earlier comments from Finance Minister P. Chidambaram who had said capital outflows could widen the current account deficit, referring to how various factors could influence the gap.

India's current account deficit hit a record high 4.8 percent of gross domestic product in the fiscal year that ended in March, fuelled by rising imports of oil and gold, but was lower than an expected gap of 5 percent.