Insta
A bank staff member counts Indian 500 rupee notes to give to customers. (INDRANIL MUKHERJEE/AFP/Getty Images)
India's current account deficit (CAD) for this financial year is expected to be around USD 40 billion, or 1.5 per cent of GDP, says a Nomura report.
India's current account deficit (CAD) rose to USD 14.3 billion - 2.4 per cent of GDP - at the end of first quarter of 2017-18.
In general terms, CAD refers to the difference between inflow and outflow of foreign exchange that has a bearing on the exchange rate.
According to the Japanese financial services major, July-September CAD is expected at about 1.6 per cent of GDP and accordingly, CAD for the first half of this fiscal (April- September) is likely to be around 2 per cent of GDP.
"For the full year, we expect the current account deficit to remain elevated at USD 40 billion, or 1.5 per cent of GDP, up from 0.7 per cent of GDP in FY17," Nomura said in a research note.
According to Nomura, the widening of the trade balance in April-September was due to transitory factors, which is expected to reverse in the second half (October-March).
The global brokerage firm laid down four reasons for "narrow" CAD numbers in the second half of this fiscal. First, a reversal of import substitution that was triggered by domestic supply disruptions and second, gains in price competitiveness.
Other factors include normalisation of gold imports and fading GST-related disruptions that are pushing exports to catch up with the global cycle.
"Overall, our analysis shows that the worsening of India's current account deficit is largely due to transitory factors and thus, external imbalances should correct in the second half of 2017-18 as these effects fade (the worst is behind us)," the report said.
Support Swarajya's 50 Ground Reports Project & Sponsor A Story
Every general election Swarajya does a 50 ground reports project.
Aimed only at serious readers and those who appreciate the nuances of political undercurrents, the project provides a sense of India's electoral landscape. As you know, these reports are produced after considerable investment of travel, time and effort on the ground.
This time too we've kicked off the project in style and have covered over 30 constituencies already. If you're someone who appreciates such work and have enjoyed our coverage please consider sponsoring a ground report for just Rs 2999 to Rs 19,999 - it goes a long way in helping us produce more quality reportage.
You can also back this project by becoming a subscriber for as little as Rs 999 - so do click on this links and choose a plan that suits you and back us.
Click below to contribute.
Latest