The Reserve Bank of India had taken steps to tighten liquidity in a bid to curb volatility in the forex market after the rupee fell to a record low of 61.21 to the dollar on July 8.
Higher imports and moderating exports growth has lead to the widening of the CAD.
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.
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.
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.
A high CAD puts pressure on the rupee, which in turn makes imports expensive and fuels inflation.
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.
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.
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.
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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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.
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.
He also indicated that the current position of the rupee is competitive against world currencies.
The Indian rupee weakened against the US dollar due to rising crude oil prices, geopolitical tensions in the Middle East, and foreign fund outflows.
The International Energy Agency (IEA) has proposed immediate demand-side measures, including remote work, lower speed limits, and reduced air travel, to mitigate the impact of a global oil supply shock caused by Middle East disruptions.
On the rupee, it expects some appreciation pressure on in the near term from greater portfolio flows.
If the conflict continues for a prolonged period, State-run oil companies may have to review retail fuel prices accordingly.
S&P Global Ratings has increased India's GDP growth forecast for the next fiscal year to 7.1 per cent, citing private consumption, investment, and exports as key drivers. However, the agency also cautioned that the conflict in the Middle East could strain India's fiscal position due to higher energy prices.
The rupee plunged to a fresh low of 93.72 against the dollar on Friday, falling 1.15 per cent in a single session - its sharpest one-day decline since February 24, 2022 - as elevated crude oil prices and strong dollar demand from oil-marketing companies and foreign portfolio investors (FPIs) weighed on the currency.
Sensex and Nifty post steepest weekly loss in over a year, falling nearly 3 per cent.
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.
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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.
Let's take a look at how countries are placed when it comes to current account deficit.
Revenue collection next financial year may be affected, and, along with this, subsidies on food and fertilisers can go up if the war in West Asia drags for long, according to experts.
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.
Foreign investors pulled out Rs 21,000 crore (around $2.3 billion) from Indian equities over the last four trading sessions amid deteriorating global risk sentiment triggered by the West Asia crisis.
Current account deficit could ease to around 3 per cent in the current fiscal year from prior estimates of about 4 per cent due to sharp drop in global commodity prices.
India imports 80 percent of its oil, which adds to inflationary pressure.
India's current account surplus moderated to $15.5 billion or 2.4 per cent of the GDP in the July-September quarter of the current fiscal, the RBI said on Wednesday. The same was at $19.2 billion or 3.8 per cent of the GDP in the preceding three-month period on account of a rise in the merchandise trade deficit, the RBI said in a statement on 'Developments in India's Balance of Payments during the Second Quarter (July-September) of 2020-21'. It is for the third consecutive quarter that India's current account remained in surplus. In the last quarter of 2019-20, the surplus was $0.6 billion. Current account deficit/surplus reflects the difference between the outflow and inflow of foreign exchange in a country's current account.
In a bid to promote the use of domestic currency for cross-border settlements, the Reserve Bank on Wednesday announced a slew of measures, including allowing banks to lend in Indian Rupees to non-residents from Bhutan, Nepal and Sri Lanka for bilateral trade.
Policies to address CAD has worked well believes the bank's economists.
Indian refiners are negotiating for additional crude cargoes from the US, Russia, and West Africa to ensure adequate supplies amid Middle East tensions. Refineries are maintaining normal processing rates and deferring maintenance to build reserves. The move comes as conflict impacts tanker movements through the Strait of Hormuz, a key energy transit route.
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