InvestorQ : Is it true that India’s current account deficit could touch 10 year highs in the June quarter?
Anamika Sodhani made post

Is it true that India’s current account deficit could touch 10 year highs in the June quarter?

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Angel dcosta answered.
2 weeks ago
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That is a possibility that has been highlighted by India Ratings in a recent report. According to the report, India’s current account deficit for June 2022 quarter could touch 3.4% of GDP at $28.4 billion. That is not hard to fathom. In the first five months of FY23, the merchandise trade deficit was $125 billion. If you extrapolate, it should be closer to $300 billion for the full year. Even assuming some relief from the services surplus, the current account deficit or CAD for FY23 is likely to get closer to 4-5% on a back of envelope calculation.

The first quarter current account deficit (CAD) is expected to hit a 36-quarter high (9-year high) and that would be a substantial surge over the last year and also the previous quarter. But if you go by early indications, things could just get worse in the coming quarters as the real spike in the trade deficit started from June onwards, due to spike in oil import bill, coal import bill and the fertilizer import bill. Just for comparison sake the last time the numbers were so high was during the fiscal years 2013 and 2014. Check out these statistics.

The expected current deficit of $28.4 billion in Q1FY23 is likely to be the highest on record in absolute terms since India reported CAD of $31.8 billion in the quarter ended December 2012. That is a 38 quarter high. Now if you look at the CAD as a percentage of GDP, then the last record figure was in the June 2013 quarter when the CAD touched 4.7% of GDP. In comparison, 3.4% in June 2022 quarter would be more sober, but things could just about get a lot worse in the remaining quarters. A global slowdown will only worsen things.

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