With the trade deficit narrowing, India’s current account deficit (CAD) is likely to narrow to around $10 billion in the April-June quarter, which would be one per cent of gross domestic product (GDP). This assessment is presented in a report. India Ratings said in a report released on Monday that the current account deficit is expected to narrow in the first quarter of the current fiscal year due to a reduction in the trade deficit. It was $18 billion or 2.1 percent of GDP in the same quarter last year.
However, the rating agency is expected to widen the current account deficit in the second quarter of the fiscal year. For the first time in eight quarters, merchandise exports may fall below $100 billion in the July-September quarter. Imports during this period are estimated at $163 billion, with the rise in crude oil prices playing a major role.
In such a scenario, the trade deficit could touch $64 billion in the second quarter of the current fiscal year.
Demand for services has also slowed due to softening demand in the global economy. This is expected to lead to a services trade surplus of $36 billion in the second quarter.