Investing.com -- India's current account deficit remained largely unchanged in the July-September quarter compared to the previous quarter, according to data released by the Reserve Bank of India (NS:BOI) (RBI) on Friday. The deficit, which is the broadest measure of trade in goods and services, stood at $11.2 billion, or 1.2% of the country's gross domestic product (GDP) for the quarter. This figure is close to the revised gap of $11.3 billion for the April-June period, which was initially reported as a deficit of $9.7 billion.
The RBI indicated that strong domestic demand, particularly for gold, led to an increase in the country's import bill during this period. This is a typical trend as spending usually rises in preparation for the Diwali festival season. The trade deficit widened unexpectedly in August due to a slowdown in global demand affecting exports. On the other hand, gold imports saw a significant increase after the government reduced the duty on the metal from 15% to 6% in July.
The central bank also warned that the current account deficit is expected to widen significantly in the October-December quarter. This comes after India's trade deficit reached a record high in November, fueled by a fourfold increase in gold imports. However, there are concerns that the amount of gold imported for the month may have been overestimated. Attempts are currently being made to reconcile the data.
The widening deficit is putting additional pressure on the Indian rupee, which fell to a record low of 85.8150 against the US dollar on Friday. The RBI's ongoing efforts to halt the rupee's decline have led to a depletion of over $50 billion from the country's foreign exchange reserves since its peak of approximately $705 billion in September.
In the July-September quarter, the trade gap rose to $75.3 billion, up from $64.5 billion a year ago, according to RBI data. Meanwhile, net services exports increased to $44.5 billion in the quarter, up from $39.9 billion in the same period the previous year.
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