New Delhi [India], December 30 (ANI): India’s Current Account Deficit (CAD) is expected to remain at 1.1 per cent of the Gross Domestic Product (GDP) in the financial year 2024-25 (FY25), according to a report by ICICI Bank.
The report highlighted significant changes in the country’s external position in recent months, driven by a widening trade deficit and foreign portfolio investment (FPI) outflows.
It said “We expect CAD at 1.1 per cent of GDP in FY25”
In November 2024, India’s trade deficit reached a record high of USD 37.8 billion, primarily due to gold imports totaling USD 14.9 billion.
Additionally, non-oil and non-gold imports have been on the rise, increasing by 3.5 per cent year-on-year during October-November 2024.
On the export side, while oil exports have declined by 36 per cent during the same period, non-oil exports have shown a positive trend. Electronics and engineering goods exports grew by 50 per cent and 27 per cent year-on-year, respectively, in October-November 2024.
The report also cautioned that despite government efforts to manage gold imports, the trade deficit is likely to remain under pressure due to a weaker global growth outlook. This is attributed to rising interest rates worldwide, with the U.S. Federal Reserve signaling a higher trajectory for rates.
The report “Even as the government is working on reconciling gold imports, the trade deficit outlook is worse because of lower global growth outlook”.
It stated that Foreign Direct Investment (FDI) inflows have remained robust; however, higher outflows driven by exits in India’s thriving primary equity market have offset the gains.
As a result, the Balance of Payments (BoP) scenario has shifted significantly. While the first half of FY25 saw a surplus of USD 23.8 billion, the second half is witnessing a steep decline. The overall BoP surplus is expected to remain neutral for FY25, with a risk of turning negative if FPI outflows exceed estimates.
On a positive note, India’s services exports and remittances have seen strong growth, helping to offset the impact of higher gold imports and weaker oil exports. This has ensured that the CAD remains manageable despite mounting challenges in the trade and capital flows landscape. (ANI)
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