Acuité projects current account deficit to widen to USD 85 bn for FY23 - Q3 FY22 BoP

India's current account deficit widened to USD 23.0 bn in Q3 FY22 (2.7% of GDP) from a deficit of USD 9.9 bn (1.3% of GDP) in Q2 FY22. This is primarily driven by an expansion of merchandise trade deficit to a record high of USD 60.4 bn in Q3 FY22 primarily led by higher imports attributable to the gradual unlocking of the economy along with festive demand. The run up seen in global commodity prices during the quarter also led imports to go up sharply during the quarter.

KEY TAKEAWAYS:

1. The deterioration in capital account led to a squeeze in the net balance of payments (BoP) surplus that shrunk substantially to USD 0.5 bn in Q3 FY22 from a healthy surplus of USD 31.2 bn in Q2 FY22.

2. The expansion of current account deficit is expected to persist in Q4 FY22 amidst gradual unlocking of economy and the spike in global commodity prices due to the Russia-Ukraine ongoing conflict.

3. Acuité expects FY22 current account deficit to print at USD 50 bn (with possibility of a minor upside). With FPI selling at a record USD 15.7 bn in Q4 FY22, the BoP in the final quarter of the fiscal year is bound to turn negative.

4. Acuité expects FY23 BoP to register a moderate deficit of USD 8 bn as against an healthy overall surplus in FY22.

For FY23, assuming an average price of Brent oil at USD 97 pb levels, Acuité projects current account deficit to widen to USD 85 bn.

Source : Equity Bulls

Keywords

CurrentAccountDeficit AcuiteRatings IndianEconomy