India's Current Account Deficit Seen At A 36-Quarter High In Q1 FY23
India's current account deficit is likely to have widened to $28.4 billion or 3.4% of GDP in Q1 FY23, India Ratings says.
India’s current account deficit is expected to jump to a 36-quarter high in the April-June quarter as a share of the GDP, and to a 38-quarter high in level terms, according to India Ratings.
The gap is likely to have widened to $28.4 billion or 3.4% of GDP in Q1 FY23, from $13.4 billion or 1.5% of GDP in Q4 FY22, India Ratings said in a note on Friday.
Although the merchandise exports touched a record high of $121.2 billion in Q1 FY23, they are likely to slow down and come in at $104.2 billion in Q2 FY23, up 1.4% annually due to the global headwinds, it said.
The International Monetary Fund, in its July update on the World Economic Outlook, trimmed its forecast for global GDP growth to 3.2% in 2022 from 3.6% earlier projected in April. Also, GDP forecasts of some of India’s key exporting destinations such as the U.S., Eurozone and China have been revised downwards, the note said. This may put India’s exports targets of $750 billion for goods and services for FY23 in jeopardy.
Merchandise imports, however, are expected to remain robust due to elevated global commodity prices and a weak rupee, India Ratings said. The agency expects the rupee to average at Rs 79.6 against the dollar in Q2 FY23. Also, the merchandise imports—which grew 40.5% annually during July-August 2022 to $128.2 billion—is expected to come in at $192.2 billion in Q2 FY23, increasing 30.3%, India Ratings said.
As such, it expects the merchandise trade deficit to come in at a fresh high of around $87 billion in Q2 FY23.