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India’s Current Account Reverts To A Deficit In Q2; Sharp Widening Expected In Q3: ICRA

India’s Current Account Reverts To A Deficit In Q2; Sharp Widening Expected In Q3: ICRA

<div class="paragraphs"><p>Indian two thousand rupees note.(Source: Bloomberg)</p></div>
Indian two thousand rupees note.(Source: Bloomberg)

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ICRA Research Report

India’s current account reverted to a deficit of $9.6 billion (down 1.3% of gross domestic product) in Q2 FY22 from the surplus of $6.6 billion (up 0.9% of GDP) in Q1 FY22, primarily led by a widening of the merchandise trade deficit (to $44.4 billion in Q2 FY22 from $30.7 billion in Q1 FY22).

While the Q2 FY22 print was somewhat smaller than our expectation, a considerable widening lies ahead, with the large merchandise trade deficits seen in October-November 2021, and the same being anticipated for December 2021.

We expect the current account deficit to print in excess of $25 billion in Q3 FY22, rivalling the size of the full year current account deficit in FY20. Consequently, we expect India’s current account balance to revert to a deficit of around $40-45 billion or 1.4% of GDP in FY22, from the surplus of $24.0 billion (up 0.9% of GDP) in FY2021.

Click on the attachment to read the full report:

ICRA BOP Outlook December 2021.pdf

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