India’s Current Account Deficit Likely to Narrow Sharply In CY23/FY24: Motilal Oswal
Indian rupee could weaken to $85 before retreating.
BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy.
Motilal Oswal Report
In the first nine months of FY23, India’s merchandise trade deficit widened to $215 billion from $136 billion in nine months-FY22. It means that the merchandise trade deficit stood at 8.6% of gross domestic product in 9MFY23, the worst in a decade and higher than 6% of GDP in FY22.
In Jan-23, however, it narrowed substantially and unexpectedly to $17.7 billion, compared to the Bloomberg consensus of $23.5 billion. Is this a one-off or could it narrow substantially in CY23/FY24? We believe the latter is true and this note explains why.
A look at details suggests that as much as 86% of the widening in the trade deficit in 9MFY23 was attributed to commodities – 55% by energy (fuel and coal) and another 31% by non-energy items (including edible oil, fertilisers, base metals and plastic and rubber).
The deficit in precious metals (i.e., valuables) narrowed by $4 billion to $30 billion in 9MFY23.
Assuming that commodity prices in the near future stay where they were in Feb-23 (since risks are balanced), there will be sharp contractions in prices of energy (down 24%), fertilisers (down18%) and edible oil (down 6%), with a modest rise in prices of precious metals and base metals (up 2-3%).
This should keep India’s merchandise imports down for the next six-eight months. With expectations of weak economic environment, we expect India’s merchandise imports to fall faster than exports, keeping the trade deficit subdued.
Click on the attachment to read the full report:
Life Insurance - Individual WRP For Private Players Grows 18% In February; LIC declines 3%: Motilal Oswal
This report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime.
Users have no license to copy, modify, or distribute the content without permission of the Original Owner.