IDFC First Bank in a recent report said in FY25, it estimates CAD at 1.3 per cent of GDP compared to 0.7 per cent of GDP in FY24
India’s current account deficit (CAD) may dip further in the March quarter of FY24 as pressure from the negative net exports during the January-March period eased to an 11-quarter high.
A part of the gross domestic product (GDP) data, net export— which is usually negative for India — captures the difference between exports and imports of both goods and services, while the CAD data, released by the Reserve Bank of India (RBI), also factors in private transfer receipts.
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In his April monetary policy statement, RBI governor Shaktikanta Das said during the first three quarters of FY24, India’s CAD narrowed significantly on account of a moderation in merchandise trade deficit coupled with robust growth in services exports and strong remittances.
During the December quarter of FY24, the CAD stood at 1.2 per cent of GDP as compared to 1.3 per cent of GDP in Q2. During April-December 2023-24, the CAD was placed at 1.2 per cent of GDP as compared to 2.6 per cent during the same period of the preceding year.
IDFC First Bank in a recent report said in FY25, it estimates CAD at 1.3 per cent of GDP compared to 0.7 per cent of GDP in FY24.
“The FY25 estimate builds in weakness in merchandise export growth and some moderation in services surplus as global growth slows. Indian crude basket is assumed to average at $85 per barrel in FY25 versus $82.5 per barrel in FY24. In FY24, the crude oil imports from Russia also helped reduce the crude oil import bill. In FY25, support from Russian crude oil imports could persist, keeping crude oil import bill contained,” it added.
The CAD has gathered additional importance as S&P while recently raising its India sovereign outlook to positive from stable, cautioned that if CAD “widens materially” to weaken India’s external position such that the country becomes a narrow net external debtor, it could revise India’s outlook back to stable again.
RBI in its latest annual report for FY24 said the external sector is gaining strength, with the narrowing of the CAD and foreign exchange reserves rising to an all-time high. “The buoyancy in services exports and private transfer receipts cushioned the CAD,” it added.
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