India current account deficit surge to 4.9% of GDP

Blame it on the sharp widening of trade deficit to 12.2% of GDP.

According to Nomura, after narrowing in Q2 2012, we estimate that India's current account deficit has worsened again in Q3 (data on 31 Dec) – to an all-time high of around 4.9% of GDP.

Here's more from Nomura:

A sharp deterioration in the trade deficit is the main reason. According to monthly customs data, the trade deficit widened to 12.2% of GDP in Q3 from 9.7% in Q2.

While oil prices have risen, most of this worsening is in the non-oil segment. We estimate that the oil trade balance has remained broadly unchanged (at -6.1% of GDP in Q3), while the non-oil trade balance has worsened to -6.1% of GDP from -3.3% in Q2.

A surge in portfolio inflows due to recent reforms has ensured that net capital inflows are enough to finance the widening deficit. However, with the current account deficit at a record high, we worry that INR remains susceptible to a sudden reversal of flows and note that the recent real effective exchange rate appreciation could worsen the underlying imbalances