The country’s current account deficit is likely to be at 0.4 per cent of GDP this fiscal and balance of payment will continue to remain surplus despite FCNR (B) redemptions, according to a report.
“We expect the current account deficit to remain benign at 0.4 per cent of GDP in financial year 2016-17 and an overall balance of payment surplus to continue, despite the FCNR(B) redemptions,” Japanese brokerage Nomura said in a note here today.
Lower commodity prices amid weak demand from investment and for gold should keep imports subdued, more than offsetting weaker global demand, it said.
Nomura expects a net outflows of around $20 billion on account of FCNR(B) redemptions.
“With a narrower current account deficit and our view of a likely pickup in FDI inflows in the coming quarters, we expect an overall balance of payment surplus of around $30 billion,” the note said.
A narrower current account deficit amid higher net FDI inflows implies that the country’s basic balance of payment will remain in a surplus, suggesting stable external fundamentals, it said.
For the quarter ended June CAD narrowed sharply to just $300 million or 0.1 per cent of GDP.
The surprise deficit was primarily on account of slightly higher imports and weaker-than-expected private remittances.