India’S Current Account Deficit Expected To Hit 1.4% By March As Crude Soars
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India's widening current account deficit (CAD), driven by the massive spike in commodity prices led by crude oil, is set to put pressure on the fragile recovery, warns a brokerage report that has revised upwards its CAD forecast to USD 45 billion or 1.4 percent of GDP by March. According to a report by British brokerage Barclays, the worries arise from the fact that the trade deficit has been jumping continuously since July.
From an average monthly trade deficit of USD 12 billion till June, it has jumped to USD 16.8 billion in July-October, with September showing the highest-ever trade deficit on record at USD 22.6 billion, the report said. "We raise our FY22 current account deficit forecast to USD 45 billion or 1.4 percent of GDP, up from USD 35 billion earlier, but a large balance of payments (BoP) surplus remains on track," it said, adding that the widening trade deficit can prove more sustained than initially thought.
Estimating that every USD 10 per barrel rise in global crude priceswill widen the trade deficit by USD 12 billion or 35 bps of GDP, as close to 85 percent of the oil demand is met through imports, and given the current elevated crude prices, the brokerage has raised its current account deficitforecast to USD 45 billion for FY22, from USD 35 billion earlier. The brokerage, however, ruled out an alarming situation and said that with record high foreign reserves, "we see no major risks to macro stability." It noted that the widening deficit trend may continue for some time as a combination of demand recovery and rising commodity prices will continue to widen the trade deficit sharply.
India’s current account deficit expected to hit 1.4% by March as crude soars: Report - CNBC TV18
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India's widening current account deficit (CAD), driven by the massive spike in commodity prices led by crude oil, is set to put pressure on the fragile recovery, warns a brokerage report that has revised upwards its CAD forecast to USD 45 billion or 1.4 percent of GDP by March. According to a report by British brokerage Barclays, the worries arise from the fact that the trade deficit has been jumping continuously since July.
From an average monthly trade deficit of USD 12 billion till June, it has jumped to USD 16.8 billion in July-October, with September showing the highest-ever trade deficit on record at USD 22.6 billion, the report said. "We raise our FY22 current account deficit forecast to USD 45 billion or 1.4 percent of GDP, up from USD 35 billion earlier, but a large balance of payments (BoP) surplus remains on track," it said, adding that the widening trade deficit can prove more sustained than initially thought.
Estimating that every USD 10 per barrel rise in global crude priceswill widen the trade deficit by USD 12 billion or 35 bps of GDP, as close to 85 percent of the oil demand is met through imports, and given the current elevated crude prices, the brokerage has raised its current account deficitforecast to USD 45 billion for FY22, from USD 35 billion earlier. The brokerage, however, ruled out an alarming situation and said that with record high foreign reserves, "we see no major risks to macro stability." It noted that the widening deficit trend may continue for some time as a combination of demand recovery and rising commodity prices will continue to widen the trade deficit sharply.
