Ind-Ra Report Estimates Trade Deficit For India To Reach 1 Per Cent Of GDP In Q2FY25

The latest report by India Ratings and Research (Ind-Ra) stated that the country is estimated to clock a deficit of nearly $8 billion, coming up to 0.8 per cent of the GDP in the first quarter

India’s current account balance (CAB) is expected to climb to 1 per cent of the nation’s gross domestic product (GDP) in the July-September quarter of the current 2024-25 fiscal year (FY25). The latest report by India Ratings and Research (Ind-Ra) stated that the country is estimated to clock a deficit of nearly $8 billion, coming up to 0.8 per cent of the GDP in the first quarter, as compared to a surplus of $5.7 billion or 0.6 per cent of the GDP recorded in the preceding quarter.

Trade Outlook

In terms of the trade outlook for the second quarter in the current fiscal year, the Ind-Ra report anticipated the services trade surplus to climb by 10.6 per cent to $44 billion against the year-ago period. The merchandise exports are expected to grow by 1 per cent on a YoY basis and reach $108 billion in the quarter ending September 30, 2024. Meanwhile, imports are estimated to soar by 3.5 per cent to $176 billion in comparison to the same period a year earlier. The goods trade deficit for the country is also projected widen to $68 billion in Q2FY25. 

Trade Performance So Far

In terms of trade, India saw merchandise exports surge by 6 per cent in April-June quarter of FY25, against the year-ago period, reported Business Standard. This growth was supported by a significantly low base effect as the first quarter of FY24 saw a decline of 14.1 per cent on YoY basis. Further, consistent demand from major markets like the US, UAE, and the Netherlands also helped in the growth of exports.

However, in comparison to the preceding quarter, exports slipped to $110.1 billion, against $120.4 billion, a seven-quarter peak, clocked in Q4FY24. Meanwhile, imports in the first quarter of the current fiscal year inched up by 7.6 per cent to $172.2 billion against the year-ago period. This improvement in imports was driven by a low base effect. 

The growth in exports was driven by products such as telecom instruments, aircraft, petroleum products, drug formulations, electric machinery and equipment, gold and other precious metal jewellery, and basmati rice, among others.