India central bank chief says current account deficit unsustainable

BANGALORE Sat Apr 6, 2013 9:23am EDT

Reserve Bank of India (RBI) Governor Duvvuri Subbarao smiles after arriving for a quarterly interest rate review briefing at the RBI headquarters in Mumbai January 29, 2013. REUTERS/Vivek Prakash

Reserve Bank of India (RBI) Governor Duvvuri Subbarao smiles after arriving for a quarterly interest rate review briefing at the RBI headquarters in Mumbai January 29, 2013.

Credit: Reuters/Vivek Prakash

BANGALORE (Reuters) - India's current account deficit is unsustainable at its present level of about 5 percent of gross domestic product (GDP), the head of the country's central bank said on Saturday, adding that a deficit of about 2.5 percent of GDP would be sustainable.

India's current account deficit hit a record $32.63 billion in the last three months of 2012, and stood at $71.7 billion for the April-December period, equivalent to 5.

The deficit for the fiscal year that ended on March 31 is unlikely to be less than 5 percent, Duvvuri Subbarao, governor of the Reserve Bank of India, added in a speech in Bangalore.

The decision by new Bank of Japan Governor Haruhiko Kuroda to inject about $1.4 trillion into the Japanese economy in less than two years is seen possibly increasing capital flows into India, which should help finance the current account deficit, government officials told Reuters this week.

(This story corrects the figure in the first paragraph for sustainable deficit to 2.5 percent (not 2.75 percent)

(Reporting by Harichandan Arakali; Writing by Henry Foy; Editing by Robert Birsel)

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