Oil Prices Drives India's Deficit to 4 yr High

By: Taarek Refaat

NEWDELHI, Dec. 7 (SEE)- Reserve Bank of India data showed that oil prices drove India's current account deficit in Q3 to a four-year high.

India's trade deficit hit a record high in Q3 accounting for $ 50 billion from $ 32.5 billion a year earlier.

The bank's analysts said the fiscal deficit would decrease if a sharp decline in crude prices occurred easing pressure on the Indian rupee.

The rupee depreciated 14 percent in the first nine months of 2018, yet, it has recovered 5.6 percent since October as oil prices plunged.

In Q3 2017, the deficit was $ 6.9 billion accounting for 1.1 percent of GDP.

This year, the account deficit between July-September was $ 19.1 billion accounting for 2.9 percent of GDP, the highest level since Q2 2013.

The balance of payments (BOP) deficit was $ 1.9 billion in Q3, compared to a surplus of $ 9.5 billion in the same quarter last year.

Oil prices have fallen more than 30 percent since early October as supply outpaces demand amid slower economic growth.

India imports more than 60 percent of its oil demands and analysts assume that a steep drop in oil prices will reduce its trade balance deficit, reduce inflation, sustain the currency and improve fundamentals of the macroeconomic aggregate.