Higher imports and moderating exports growth has lead to the widening of the CAD.
'OMCs are incurring losses of Rs 1,000 crore per day due to the West Asia crisis.'
India's current account deficit (CAD) will be contained at USD 45 billion this financial year, well below the record high level of 2012-13, Finance Minister P Chidambaram said on Monday.
BofA-ML revised its end-2015 rupee-dollar forecast to 60 from 64 earlier.
In absolute terms, the CAD stood at $4.6 billion in the current fourth quarter, compared with $13 billion in the year-ago quarter and $17.7 billion in the third quarter of fiscal year 2018-19.
India posted a current account surplus of $13.5 billion or 1.3 per cent of GDP in March quarter 2024-25 as compared with $4.6 billion in the year-ago period mainly on account of surge in services exports and higher remittances, according to RBI data released on Friday.
Both the government and RBI are expecting the CAD to be below $56 billion in the current fiscal compared to the record high of $88.2 billion, or 4.8 per cent of the GDP last fiscal.
A high CAD puts pressure on the rupee, which in turn makes imports expensive and fuels inflation.
The country's current account deficit is likely to hit a three-year high of 1.8 per cent or $43.81 billion in FY22, as against a surplus of 0.9 per cent or $23.91 billion in FY21, a report said on Thursday. According to an assessment by India Ratings, the Current Account Deficit (CAD) has moderated to $17.3 billion or 1.96 per cent of GDP in the fourth quarter of FY22 as against $8.2 billion or 1.03 per cent in the year-ago period, and massively down from $23.02 billion or 2.74 per cent in Q3, which was a 13-quarter high. The improvement in the key numbers are due to the remarkable improvement in merchandise exports in FY22, when it grew 42.4 per cent as against a negative 7.5 per cent in the pandemic-hit FY121.
Anand Rathi recently carried out a research on the behaviour of the economy and CAD.
India recorded a current account surplus of $5.7 billion or 0.6 per cent of GDP in the March quarter, the Reserve Bank of India said on Monday. This is the first time in ten quarters that the crucial metric of the country's external strength has turned into surplus mode. In the year-ago period, the current account deficit stood at $1.3 billion or 0.2 per cent of GDP, and the same was $8.7 billion or 1 per cent of GDP in the preceding quarter ending December 2023.
It is domestic policy distortions and inaction to correct them that lie behind the large CADs.
The trade deficit stood at $10.14 billion compared with $9.22 billion in November, a trade ministry official said on Friday.
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India's current account deficit narrowed down to 3.6 per cent of GDP in the January-March quarter but totalled a record 4.8 per cent for the full 2012-13 fiscal.
It may widen because of money outflows.
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Chidambaram also said the government will take steps to curb imports of gold, silver, oil and luxury goods.
Foreign Portfolio Investors (FPIs) have withdrawn Rs 27,048 crore from Indian equities so far in May, bringing the total outflows for 2026 to Rs 2.2 lakh crore, driven by global macroeconomic and geopolitical uncertainties.
The Indian rupee is expected to trade between 80 and 84 against dollar in the first three months of 2023 with support from overseas inflows though worsening current account deficit (CAD) and reduced interest rate differential between the US and India pose challenges. According to a Business Standard Poll of 10 participants, most said the rupee could gain strength in January due to foreign inflows, and the Reserve Bank of India (RBI) is not expected to allow the currency to depreciate ahead of the Union Budget scheduled on February 1. The rupee depreciated 10.15 per cent in 2022, its worst performance since 2013 as the war in Europe and the interest rate increase by the US Federal Reserve prompted investors to flee emerging markets.
Even if there is an early agreement on a cessation of hostilities in West Asia, the price shock will not go away easily, points out A K Bhattacharya.
He also indicated that the current position of the rupee is competitive against world currencies.
On the rupee, it expects some appreciation pressure on in the near term from greater portfolio flows.
A prolonged supply shock can transmit to lower incomes, and dampen confidence and sentiment, warns Aditi Nayar, chief economist, head-research and outreach, ICRA.
'At the first sign of real trouble, that money will move. There will be a run.'
The measures announced by it risk backfiring, disrupting the foreign exchange market, and intensifying the very pressures they seek to contain, with broader consequences for the economy points out Rajeswari Sengupta.
India's net oil import bill could rise by $56 billion to $64 billion annually assuming global crude averages $110 to $115 per barrel in FY27.
Moody's Ratings has downgraded India's growth forecast for financial year 2026-27 (FY27) to 6 per cent from 6.8 per cent, attributing the revision to weaker consumption and industrial activity, elevated energy prices, and rising input costs stemming from the West Asia conflict.
'...especially pressure on the rupee, the current account deficit, and foreign exchange outflows.' 'The key question over the next several months is whether the government can prevent external turbulence from feeding into domestic economic pessimism.'
State-owned Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL) are reportedly incurring losses of Rs 18 per litre on petrol and Rs 35 per litre on diesel, as they continue to absorb rising crude oil costs without increasing retail prices. This situation is leading to expectations of a fuel price hike after upcoming state elections.
Reserve Bank of India (RBI) Governor Sanjay Malhotra stated that preventing second-round effects of supply shocks, where inflation expectations rise due to prolonged disruptions, is the primary role of monetary policy. He also defended the RBI's foreign exchange market interventions, asserting it did not commit to an 'indefensible peg'.
India emerged reasonably well from 2025. But now, the oil shock and war-related supply disruptions have again driven funds out of India and significantly weakened the rupee, points out Ajay Chhibber.
Goldman Sachs has materially lowered its earnings growth forecast for Indian companies by a cumulative 9 percentage points over the next two years.
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Preliminary balance of payments data published on Monday showed that the current account deficit fell to $5.2 billion in the July-September quarter of 2013-14, or 1.2 per cent of gross domestic product.
S&P Global Ratings warns that a sustained rise in crude oil prices to $130 per barrel could significantly slow India's economic growth, weaken fiscal metrics, and strain corporate and banking sector performance, potentially reducing growth by up to 80 basis points.
India's current account slipped into a deficit of $9.6 billion or 1.3 per cent of GDP in the September quarter, the Reserve Bank said on Friday. The current account, which records the value of exports and imports of both goods and services along with international transfers of capital, was in a surplus mode both in the quarter-ago and year-ago periods. India's current account surplus had stood at $6.6 billion or 0.9 per cent of GDP in the April-June 2021 quarter, while in the year-ago period (Q2FY22), the surplus had stood at $15.3 billion or 2.4 per cent of the GDP, the data said.
Let's take a look at how countries are placed when it comes to current account deficit.
He said gold imports in October rose slightly to 23.5 tonnes.
Given recent tendencies, it was only a matter of time before the rupee fell below its previous low.
The Indian government has increased import duties on gold and silver from 6 per cent to 15 per cent to curb inbound shipments of precious metals amid a rising import bill due to the West Asia crisis.
'Once the currency goes out of the hand, then possibly your major challenge is that it will not come back.'
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