India's current account deficit balloons to 5.4% of GDP

Blame it on "wider merchandise trade deficit".

According to Nomura, India's current account deficit widened to 5.4% of GDP in Q3 2012 (USD22.4bn) from 3.9% (USD16.6bn) in Q2, in line with expectations (Consensus: USD23.0bn, Nomura: USD19.5bn).

Here's more from Nomura:

This was largely due to a wider merchandise trade deficit (11.7% of GDP in Q3 from 10.0% in Q2) as higher commodity (coal, crude oil, fertilizers) imports and contraction in exports (due to weak global demand) more than offset the fall in gold imports.

Adding to the concern, invisible inflows which have been masking the significant trade deficit remained almost unchanged as lower remittances and higher investment income outflows offset the slight increase in service exports.

On the capital account side, net inflows rose sharply to USD23.9bn in Q3 from USD16.1bn in Q2 largely due to a sharp rise in equity portfolio and direct investments.

Consequently, the composition of capital inflows also improved over the quarter with the share of equity inflows rising sharply to 51% of total capital inflows from 25% in Q2.

Overall, the balance of payments (BoP) dipped marginally into a deficit of USD0.2bn in Q3 from a surplus of USD0.5bn in Q2.