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Informist, Tuesday, Jul 16, 2024

 

MUMBAI – India's current account deficit will likely remain manageable at around 1.0-1.1% of GDP in the current financial year ending March despite the recent rise in the merchandise trade deficit, economists said. India's current account deficit in 2023-24 moderated to $23.2 bln or 0.7% of GDP from $67.0 bln or 2.0% of GDP a year ago due to a lower merchandise trade deficit.

 

Data released by the Ministry of Commerce and Industry on Monday showed that India's merchandise trade deficit widened to $20.98 bln in June compared to a deficit of $19.19 bln a year ago, but was lower than $22.98 bln in May. India's merchandise trade deficit in Apr-Jun rose 10.4% on year to $62.02 bln.

 

The current account deficit is likely to remain in check because crude oil prices have remained in a narrow range over the past year, negating the risk of an increase in India's import bill. However, the risk of a price shock remained due to the geopolitical tensions in West Asia, economists said. "While the geopolitical conflict in the Middle East region has not worsened, it continues to fester, having a detrimental impact on the cost of merchandise trade," QuantEco Research said in a note. 

 

Last month, Reserve Bank of India Governor Shaktikanta Das said the current account deficit in 2024-25 will remain within sustainable levels.

 

The merchandise trade deficit in June was lower sequentially, mainly due to lower growth in oil imports. Growth in oil imports moderated on an annual in June, while growth in non-oil imports was marginally higher than in May. Oil imports in Apr-Jun rose 23.1% on year to $51.50, while non-oil imports rose 2.1% to $120.72 bln.

 

Economists said India's services sector exports have plateaued around $13 bln over the past few months. Equirus Securities said India's import cover stayed near stagnant at 11.4 months compared to 11.2 months in May. 

 

While economists expect the external sector balance to be comfortable, concerns will remain around volatile commodity prices, the re-emergence of geopolitical tensions and, an asynchronous global monetary policy cycle, which is already underway.  End 

 

US$1 = 83.58 rupees

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Kabir Sharma

Edited by Saji George Titus

 

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