India's October trade deficit widened 43 percent from a year earlier as the rapidly expanding economy took in more imports and analysts said the increase would put further pressure on the current account deficit.
Government data, which excludes defence trade, on Wednesday showed the trade deficit last month was $3.28 billion, up from $2.29 billion in October 2004.
As a result, the trade gap for April-October, the first seven months of the fiscal year, widened to $23.51 billion. The deficit for the same period of 2004/05 stood at $14.18 billion.
"We now expect the current account deficit to widen to $17.4 billion (2.2 percent of GDP) in 2005/06, up from our previous forecast of $10.1 billion," said Rajeev Malik, economist with J.P. Morgan in Singapore.
"As a share of GDP, India's current account deficit is forecast to balloon to a 15-year high this year."
India ran up a record trade shortfall of $38.13 billion for the year to March 2005, according to the central bank which includes defence deals in its calculations.
Rapid growth of nearly 7 percent in Asia's third largest economy was largely to blame last year, but rising oil prices have also bumped up India's import bill.
The rupee slipped slightly after the trade data and was dealt at 45.76 per dollar compared with 45.7425 beforehand.
The rupee has been under pressure recently, hitting a 13-month low last week, as foreign portfolio investment slowed in October in the face of a correction on India's stock market. Up until then, strong foreign portfolio inflows had helped offset downward pressure on the rupee from the widening trade and current account gaps.
SMART RECOVERY Export growth staged a smart recovery in October growing 27.54 percent to $8.08 billion as manufacturers rushed to meet pre-Christmas orders from key US and European Union markets. Exports had grown just 7.5 percent in September.
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