India central bank chief says current account deficit unsustainable

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

India's current account deficit hit a record US$32.63 billion (S$737 million) in the last three months of 2012, and stood at US$71.7 billion for the April-December period, equivalent to 5.4 per cent of GDP.

The deficit for the fiscal year that ended on March 31 is unlikely to be less than 5 per cent, Dr 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 US$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.