Nomura sees India's current account deficit widening to 2.8% of GDP
20 Aug 2018
A widening of India’s trade deficit could push the country’s current account deficit to 2.8 per cent of GDP in the current fiscal (April 2018 to March 2019) from 2.5 per cent in the previous fiscal, according to investment and advisory firm Nomura.
According to official figures India's trade deficit in July widened to $18 billion, the highest in more than five years.
This, according to Nomura, could worsen as the downside risks to exports remain due to a weaker global growth outlook.
And, with rising oil prices, depreciating rupee and outflow of portfolio investments, India’s CAD might rise in the current fiscal, it noted.
"Overall, we expect the current account deficit to widen to 2.8 per cent of GDP in FY19 from 1.9 per cent in FY18," the Japanese financial services major said.
With a falling rupee, Nomura further said, the "balance of payment funding will remain a challenge in FY19 as the basic BOP (current account + net FDI) is negative and portfolio flows also remain negative".
India’s CAD jumped to $48.7 billion, or 1.9 per cent of GDP, in 2017-18 fiscal. This was higher than $14.4 billion, or 0.6 per cent, CAD in 2016-17 fiscal.
According to official figures India's trade deficit, or the gap between exports and imports, in July widened to $18 billion.
Trade shortfall puts pressure on the current account deficit (CAD), a key vulnerability for the economy.
India's exports stood at $25.77 billion in July, while it imported goods valued at $43.79 billion in July 2108.
India’s imports, on the other hand, is likely to remain elevated in the near-term due to high oil prices, though weak rupee and domestic slowdown will moderate imports in coming quarters.