The BoP was in deficit of Rs 9,349 cr and Rs 6,520 crore during the first and second quarter respectively.

However, India's current account balance is in deficit during the fiscal up to December-end and the deficit is pegged at Rs 18,049 crore during the period, despite encouraging export performance.

Says CARE's chief economist Dr Mohan Nagarajan: "The current account deficit is due to the high oil prices. However, the strong export growth so far this year has helped mitigate the impact of high global crude oil prices. The current account deficit is not at all alarming as the economy is in a good position with comfortable forex reserves."

India's exports grew at 21 per cent year-on-year in April-January, enabled the country to cut the surging oil import bill after global crude oil prices hit decade-high in October.

However, economists voiced concern that the trade deficit could worsen next year as the slowdown in the United States and other markets would dampen demand for India's exports.

Software exports have so far not been severely affected by the global technology sector downturn, but economists expect that a heavy dependence on the US markets will have a bearing in the longer run.

Foreign direct investment stood at Rs 3,431 crore for the third quarter of the fiscal, which is well above the second quarter figure of Rs 2,341 crore.

"This is on account of the State Bank of India's (SBI) India Millennium Deposit (IMD) inflow, which has negated the impact of high oil prices," Mr Aashish Pitale, head of research at JP Morgan, said.

During the quarter, SBI raised $5.5 billion from the issue of IMD to defend the rupee after it hit all-time lows of 46.92 to the dollar in October. The rupee lost 7 per cent in 2000, but has since recovered, supported by foreign investment and IMD inflows. However, foreign exchange reserves were comfortable at more than $42 billion.