Indian Current-Account Gap Widens More than Expected

India’s current-account deficit widened more than estimated to the largest since the quarter through June 2013 as exports slowed and gold imports surged.  The July-September shortfall in the broadest measure of trade widened to $10.1 billion from $7.8 billion the previous quarter, the Reserve Bank of India said in a statement yesterday. That compared with a $9.4 billion median estimate in a Bloomberg survey of 16 economists. The gap amounts to 2.1 percent of gross domestic product, lower than the 2.5 percent the central bank considers sustainable.

A recession in Japan and deteriorating outlook for the euro-area economy are keeping a lid on demand for Indian products as Prime Minister Narendra Modi seeks to revive manufacturing in Asia’s third-largest economy. Any further increase in gold shipments after authorities again eased import curbs last month will probably be partly offset by a drop in oil prices.

“Gold imports are likely to increase but they are not as attractive as they used to be in early 2013 as an asset class, so that should limit the pick-up in demand,” Anubhuti Sahay, an economist at Standard Chartered Plc in Mumbai, said by phone. “Oil is a much bigger proportion in the total imports and lower prices should benefit.”

Bloomberg

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