While India continued to experience substantial net capital inflows, the situation changed for the worse in September/October 2008 in the wake of Lehman Brothers’ bankruptcy, with substantial net capital outflows and this, in combination with widening trade account and current account deficits resulted in the decline of foreign exchange reserves of about USD 60 billion, from USD 316 billion in May 2008 to about USD 255 billion now.
The trade deficit widened to USD 120 billion (10% of GDP) and current account deficit widened to USD 29 billion (2.6% of GDP).