India's current account deficit widened to a massive $23 billion in October-December 2021 from $9.9 billion in July-September 2021 due to a higher merchandise import bill, data released by the Reserve Bank of India (RBI) on March 31 showed.
The current account deficit in October-December 2020 was $2.2 billion.
At $23 billion, the current account deficit for the last quarter of 2021 is the highest in nine years. The last time the current account deficit was higher was in the last quarter of 2012, RBI data showed.
In October-December 2012, India had posted a current account deficit of $31.8 billion.
In percentage terms, the current account deficit was 2.7 percent of GDP in October-December 2021 as against 1.3 percent in the previous quarter.
The sharp increase in the current account deficit in the last quarter was because of merchandise imports ballooning to $169.4 billion from $111.8 billion in July-September 2021, with rising global crude oil prices helping propel the import bill higher. This resulted in a highest-ever quarterly merchandise trade deficit of $60.4 billion.
On the services front, the RBI said net receipts increased both sequentially and on a year-on-year basis "on the back of robust performance of net exports of computer and business services".
The services trade surplus for October-December 2021 was $27.8 billion, up from $25.6 billion in July-September 2021.
The latest quarterly print takes the current account deficit for the first nine months of FY22 to $26.5 billion as against a surplus of $32.1 billion in the correspondng period of FY21.
"We expect the current account deficit to recede somewhat in Q4 FY22, to around $17-21 billion, with the third wave temporarily curtailing certain imports," Aditi Nayar, ICRA's chief economist, said.
According to Nayar, if the war between Russia and Ukraine leads to the price of India's crude oil basket rising to around $105 per barrel in FY23, the current account deficit next year could be as high as $95 billion.