The deficit worsened because exports did not grow with global demand remaining soft owing to the European crisis. At the same time imports continued to rule high because of demand for oil and gold in 2011-12. Data released by RBI shows that remittances from export of software and from non-resident Indians continued to remain strong but were not enough to make up for the shortfall arising out of merchandise trade. The deficit numbers were much higher than what was expected by those in financial circles. A Bloomberg News survey was for a deficit of $19.56 billion in the first quarter of 2012.
Import of bullion has fallen sharply after the government doubled customs duty on gold being brought into the country.
Foreign direct investment also slowed sharply to $1.4 billion from $5 billion in the preceding quarter. Overall, the balance of payment continued to remain in deficit of $5.7 billion which is significantly lower than the $12.8 billion BoP deficit in the quarter ended December 2011.