, India

Here's how bad India's current account deficit has been since 2008

It's approaching an average record 5-5.2% of GDP.

According to DBS, it has been a one-way street south for the Indian rupee since the global financial crisis broke in 2008, which has led the currency down 37% from the sub-40/ dollar in late 2007 to around 53.15 monthly average in March 2013.

While the unit’s depreciation streak could be put to multiple drivers, including the risk-averse global financial conditions, the deterioration in domestic macroeconomic fundamentals also played an equally disparaging role.

Here's more from DBS:

It is clear that from the ‘something has to give’ angle, the knock-on the rupee was unavoidable and inevitable, and probably overdue.

Panning over the movements in the Dollar index (DXY) in the same period, USDINR has outperformed the moves in the DXY, suggesting that the weakness in the rupee had a bigger hand at the USDINR upmove rather than broad strong dollar bias.

Part of the rupee’s depreciation was driven by the natural adjustment to the structural deterioration in the current account deficit position. From a shortlived 2.3% surplus in 2003-04, the current account deficit (CAD) averaged -0.9% between 2004-08.

Thereafter, however the CAD jumped significantly every year and was en route to average record -5.0-5.2% of GDP in FY12/13.

Taking this further, two factors were responsible for the weak fiscal balances - strong focus on government spending, which weighed on the fiscal balances and shift away in the structural growth drivers to consumption, from investments. 

Efforts to reinvigorate the economy through foreign investments were initiated, but hit roadblocks from political quarters.

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