India’s current account deficit is expected to remain “comfortable” in the current fiscal even as it rose sequentially to USD 6.2 billion in the first quarter, says a report.
Current account deficit for the first quarter of FY2015-16 stood at USD 6.2 billion (1.2 per cent of GDP), sequentially higher than USD 1.5 billion in the previous quarter, the report by India Ratings & Research (Ind-Ra) said today.
The CAD, however, was lower than USD 7.9 billion the first quarter of FY2014-15.
Current account deficit reflects high outgo of forex and subsequently weakens the domestic currency.
Invisible receipts were mainly instrumental in improvement of Current Account Deficit (CAD) in the first quarter of current fiscal, it said.
“Invisible receipts were mainly instrumental (7.89 per cent improvement) in yoy improvement in CAD. Ind-Ra expects CAD to remain comfortable in FY16,” the report said.
In 2014-15, CAD stood at USD 27.9 billion or 1.3 per cent of the gross domestic product. In 2013-14 it was at USD 32.4 billion (1.7 per cent of GDP) and in 2012-13 at USD 88.1 billion (4.7 per cent of GDP).
Ind-Ra said merchandise exports contracted for the third consecutive quarter and a worrying trend is that the magnitude of the contraction has been increasing with each quarter.
“However, with Chinese economy slowing, there is also opportunity for India. But, much would depend on the policy support and how quickly Indian manufacturers scale up production to take advantage of this situation.”
On oil, it said crude oil prices are likely to remain soft for remaining part of 2015-16 due to the sluggish global recovery and demand-supply situation in the crude oil market.
“However, the flip side of softer oil prices has been that it has impacted India’s export growth as well.”
Further, it said remittances by the Indian diaspora have been a stable source of foreign exchange for India and helped the country finance trade deficit.
“It has remained in excess of USD 16 billion continuously over the last nine quarters thus allaying the fear of remittances declining as a result of the global economic slowdown.
“Ind-Ra expects remittances to follow a similar pattern in the coming quarters as well.”