InvestorQ : Is it true that India’s current account deficit may cross $100 billion in FY23?
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Is it true that India’s current account deficit may cross $100 billion in FY23?

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Priyanka N answered.
1 month ago
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The current account deficit (CAD), especially for countries like India, is closely linked to currency strength and external ratings. A recent report by Bank of America has pegged the CAD of India for FY23 at $105 billion. In relative terms, that is roughly 3% of GDP. The villain of the piece is likely to be merchandise trade deficit. It was $24.3 billion in May 2022 and $25.6 billion in June 2022. For the June 2022 quarter, cumulative trade deficit is estimated to cross $70 billion. With full year trade deficit extrapolated to $280 billion, CAD is an issue.

The view expressed by BOFA is that even if crude oil imports stabilized, the CAD would still get hit by higher non-oil, non-gold imports. In addition, to add to the misery, a global slowdown could lead to lower exports and push CAD beyond 3%. BOFA has raised its estimate for CAD from 2.6% to 3% of GDP. The BOFA report also expects pressure on filling the gap due to heavy FPI outflows, which are already in excess of $35 billion since October 2022. Imported inflation could worsen matters and that is evident from INR at 79.65/$.

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