India’s current account deficit (CAD) expanded in the April-June quarter compared to the previous three months, primarily driven by a higher trade deficit, reduced surplus in net services, and a decline in private transfer receipts, as reported by the Reserve Bank of India (RBI).
During the first quarter of fiscal year 2023/24, the CAD widened to $9.2 billion, equivalent to 1.1% of the gross domestic product (GDP), up from $1.3 billion, or 0.2% of GDP, in the January-March quarter. In the same period a year ago, the deficit was $17.9 billion, or 2.1% of GDP, according to RBI.
A Reuters poll of 17 economists had a median forecast of a deficit of $8.9 billion, or 1% of GDP, for the most recent first quarter. The merchandise trade deficit increased to $56.6 billion in the quarter, up from $52.6 billion in the previous quarter but less than the year-ago deficit of $63.1 billion.
India’s current account deficit (CAD) widened to $9.2 billion (-1.1 per cent of GDP) in Q1 FY2024 from $1.3 billion in Q4 FY 2023 (-0.2 per cent of GDP), but trailed our forecast led by a healthier than anticipated merchandise trade balance, even as the services trade surplus and balance of secondary income were smaller than anticipated.”
experts also noted that with the average merchandise trade deficit increasing in July and August 2023 compared to Q1 FY2024 levels, along with the recent rise in crude oil prices, ICRA estimates that the CAD will widen sequentially to $19-21 billion (-2.3% of GDP) in Q2 FY2024.
In the broader outlook, ICRA projects the CAD to expand to $73-75 billion (-2.1% of GDP) in FY2024 from $67.0 billion (-2% of GDP) in FY2023, factoring in an average crude oil price of $90 per barrel in the second half of FY2024.
