India’s CAD may have reached high of 3.4 per cent of GDP

New Delhi: The Current Account Deficit (CAD) may have reached to a nine-year high of 3.4 per cent of the Gross Domestic Product (GDP) in the first quarter of this financial year against a surplus of 0.9 per cent a year ago, says India Ratings (Ind-Ra).

According to the rating agency, the amount of CAD at $28.4 billion may have reached its highest level in 38 quarters. At $13.4 billion or 1.5% of GDP in the fourth quarter of 2021–2022, the CAD.

In Q1 of FY23, merchandise exports reached a new high of $121.2 billion. They are most likely to slow down and reach $104.2 billion in the second quarter of the year, expanding by just 1.4, according to Ind-Ra.

In its July update, the International Monetary Fund lowered its prediction for global GDP growth from 3.6% in April 2022 to 3.2%. Additionally, the GDP projections for some of India’s major export markets, including the US, Europe, and China, have been reduced. India’s FY23 export goals of $750 billion in goods and services may be in peril as a result of this.

However, Ind-Ra anticipated that imports of goods would continue to grow strongly because of rising global commodity prices (Brent crude averaged $ 100.7 a barrel in August of this year) and a depreciating rupee. In the second quarter of this fiscal year, the agency predicted that the rupee would average 79.6 versus the dollar.

In the period of July to August 2022, imports of goods increased by 40.5% year over year to $128.2 billion, while in the second quarter of fiscal year 2023, they are predicted to rise by 30.3% YoY to $192.2 billion.

Ind-Ra projected that in Q2 of FY23, the merchandise trade imbalance would reach a new high of almost $87 billion.

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