India’s current account deficit is expected to stay comfortable at $10.1 billion in this financial year, largely on account of likely demand moderation post the demonetisation move, says a Citigroup report. Economic Times
According to the global financial services major, the country’s current account could likely widen in fiscal year 201718 to $30 billion or 1.2 per cent of GDP. “Incorporating the October data and with likely demand moderation post the demonetisation move, we expect current account deficit to stay comfortable at $10.1 billion in FY17 or 0.5 per cent of GDP,” Citigroup said in a research note
As per the report, the current account could likely widen in financial year 2018 as average crude prices are expected to rise, along with the gold demand in the next fiscal year. Moreover, higher exports growth and nonoil, non gold imports are likely to widen the country’s current account situation as well. India’s merchandise trade deficit widened to $10.2 billion in October from $8.3 billion last month, almost entirely due to an increase in monthly gold imports.
Gold imports rose to $3.5 billion from $1.8 billion last month as jewellery demand increased in the festive season. “The last two months of trade data reinforces our view that after two years of steady decline, exports and imports growth have begun to normalize as commodity prices stabilise,” Citigroup said. Citigroup expects capital flows at $39 billion in financial year 2017 taking BoP surplus to $29 billion (earlier estimate $24 billion). The BoP surplus is likely to improve further in financial year 2018 to $39 billion as NRI deposits swing to positive.