1. Nomura: India’s current account deficit may swing to surplus in Q1 2016

Nomura: India’s current account deficit may swing to surplus in Q1 2016

CAD narrowed to 1.4 per cent in April-December, from 1.7 per cent in the corresponding period of 2014-15.

By: | New Delhi | Published: May 2, 2016 6:15 PM
Money From 2007 to 2015, the current account improved by 1.5 per cent of GDP on average, between January-March and October-December every year. (Reuters)

 

India’s current account deficit (CAD) is likely to swing to surplus in the January-March period of this year amid lower oil and gold imports, says a Nomura report.

The current account balance is expected to record a surplus of around USD 3 billion (0.6 per cent of GDP) in January-March period of 2016 from a deficit of USD 7.1 billion (1.3 per cent of GDP) in the October-December quarter of 2015.

“This is largely seasonal in nature, but is also helped by lower oil and gold imports,” Nomura said in a research report, adding if this materialises, it would be the first quarterly surplus in nine years.

CAD narrowed to 1.4 per cent in April-December, from 1.7 per cent in the corresponding period of 2014-15.

Current Account Deficit, the difference between inflow and outflow of foreign exchange, came in at 1.3 per cent in 2014-15, 1.7 per cent in 2013-14 and a record high of 4.8 per cent of GDP in 2012-13.

In the October-December quarter, forex reserves increased by USD 4.1 billion mainly because of higher FDI flows under the capital account.

From 2007 to 2015, the current account improved by 1.5 per cent of GDP on average, between January-March and October-December every year.

In 2016, despite weak merchandise exports and a lower services trade surplus, lower oil imports and a sharp moderation in March gold imports (due to jewellers’ strike) helped improve the current account, it said.

“Overall, India should record a large basic balance of payments (current account and net FDI) surplus of around USD 16 billion (0.8 per cent of GDP) in 2015-16, its largest in a decade,” Nomura added.

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