Balance of payments slips into deficit

India’s balance of payments slipped into deficit in the third quarter for the first time in two years, as foreign investors turned net sellers of financial assets in anticipation of December’s US rate hike. The account of India’s monetary transactions with the rest of the world turned into a deficit of

$0.9 billion in July-September.

India’s overall balance of payments slipped into deficit for the first time in six quarters in April-June on large foreign dollar outflows.

The deficit , a measure of economic transactions between the country and the rest of the world, stood at $11.3 billion, compared to a surplus of $11.4 billion a year earlier, Reserve Bank of India data showed on Friday.

The current account also posted a deficit, which rose to $15.8 billion or 2.4 per cent of gross domestic product from $15.0 billion or 2.5 per cent a year ago. The merchandise trade gap widened to $45.7 billion from $41.9 billion.

Both deficits have widened “beyond comfort levels” as a consequence of the current global environment of higher rates and tight dollar liquidity, said A Prasanna, chief economist at ICICI Securities Primary Dealership in Mumbai.

“Funding this gap with stable flows is difficult and that is reflected in the rupee’s weak performance.”

A rout in emerging markets led to dollar outflows of $8.1 billion compared with inflows of $12.5 billion a year ago, leading to a sharp fall in the rupee.

The rupee has fallen by 11 percent, the most among Asian currencies, since January, touching a record low of 72.11 to the dollar on Thursday.