CAD to come in at 9-year high in first quarter of FY23: Ind-Ra

The current account deficit (CAD) may have reached a nine-year or 36-quarter 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, said India Ratings (Ind-Ra) on Friday.

In terms of absolute amount, CAD at $28.4 billion may have touched the highest level in 38 quarters, the rating agency said. CAD was at $13.4 billion or 1.5 per cent of GDP in the fourth quarter of 2021-22.

Merchandise exports touched a record high of $ 121.2 billion in Q1 of FY23. Ind-Ra said that they are likely to slow down and come in at $104.2 billion in the second quarter of the year, growing by just 1.4 per cent year-on-year (YoY) due to global headwinds.

The International Monetary Fund, in its July update, trimmed its forecast for global GDP growth to 3.2 per cent from 3.6 per cent in April 2022. Also, GDP forecasts of some of India’s key exporting destinations such as the US, Europe and China have been revised downwards. This may put India’s export targets of $750 billion (goods and services) for FY23 in jeopardy.

On the other hand, Ind-Ra expected merchandise imports to remain robust due to elevated global commodity prices (Brent crude averaged $ 100.7 a barrel in August this year) and a weak rupee. The agency expected the rupee to average 79.6 against the dollar in Q2 of this financial year.

Merchandise imports grew 40.5 per cent YoY in July-August 2022 to $128.2 billion and are expected to come in at $192.2 billion in Q2 of FY23, increasing by 30.3 per cent YoY.

Ind-Ra expected the merchandise trade deficit to come in at a fresh high of around $87 billion in Q2 of FY23.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor