India’s current account deficit is expected to reduce to around $10 billion in the April-June quarter (Q1) of the current fiscal year (2023-24), rating agency India Ratings stated on Monday. The agency estimated that the nation’s current account deficit (CAD) will narrow to about 1 per cent of the GDP in the first quarter, in comparison to the deficit of $18 billion, which was 2.1 per cent of the GDP, in the same period a year ago.
According to a PTI report, the ratings agency projected the CAD to increase in the second quarter on account of the dip in exports. It stated that merchandise exports are estimated to fall below $100 billion after eight quarters.
Further, the agency stated that imports are expected to increase to around $163 billion, improving on the seven-quarter low of $160.3 billion reported in Q1FY24. This change can be attributed to the increase in crude prices since July.
The report added that the overall trade deficit is expected to touch a three-quarter high of $64 billion. Another contributing factor is the restraint in services demand since June due to the slowdown in the global economy, the agency stated.
Global services PMI touched a five-month low of 52.7 in July, therefore services trade surplus is projected around $36 billion in the second quarter, the agency said.
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While merchandise exports fell in the first quarter by about 14 per cent, on a year-on-year (YoY) basis, this decline was the biggest in the last 12 quarters. The goods exports reported a seven-quarter low of $104 billion in Q1FY24.
The agency detailed that merchandise imports in the first quarter reported a seven-quarter low of $160.3 billion, while goods imports fell by almost 13 per cent, the sharpest decline since the second quarter during the fiscal year 2020-21. Further, commodity prices helped reduce the import value as the inbound shipments of critical commodities like crude, coal, vegetable, etc declined in terms of value.