India’s current account returned to deficit in the second quarter; Strong expansion planned for the third quarter: ICRA
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India’s current account fell to a deficit of $ 9.6 billion (down 1.3% of gross domestic product) in the second quarter of FY22, from a surplus of $ 6.6 billion. dollars (up 0.9% of GDP) in the first quarter of FY22, mainly due to a widening merchandise trade deficit (to $ 44.4 billion in Q2 FY22 from $ 30.7 billion of $ at T1 FY22).
While the Q2 FY22 printout was a bit smaller than our expectations, a huge widening is ahead, with the large merchandise trade deficits seen in October-November 2021, and the same expected for December 2021.
We expect the current account deficit to exceed $ 25 billion in the third quarter of FY22, rivaling the size of the current account deficit for the fiscal year in FY20. Therefore, we we expect India’s current account to decline to a deficit of around $ 40-45 billion or 1.4% of GDP in FY 22, from a surplus of $ 24.0 billion (up 0.9% of GDP) in FY2021.
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