Blitz Bureau
NEW DELHI: Even as India’s merchandise trade deficit has come under some pressure, robust services exports and healthy remittances flow should help keep the country’s current account deficit (CAD) in the safe zone during the current financial year (FY 2024-25), according to a Crisil report released on December 30.
“We expect CAD at about 1.0 per cent of GDP in fiscal 2024-25, as against 0.7 per cent last year. In addition, the impact of geopolitical issues will remain a monitorable,” the report stated.
The Crisil report highlights that India’s current account deficit (CAD) was largely unchanged at $11.2 billion (1.2 per cent GDP) in the second quarter (July-September) of fiscal year 2024-25 compared with $11.3 billion (1.3 per cent of GDP) in the corresponding year-ago quarter.
Sequentially, though, the metric, which reflects a country’s external payments position, widened slightly from $10.2 billion (1.1 per cent of GDP) in the first quarter.
A key metric, CAD was $21.4 billion (1.2 per cent of GDP) in the first half of fiscal 2025, as against $20.2 billion (1.2 per cent of GDP) in the year-ago period. Although CAD moderated and financial inflows increased, the rupee depreciated to 83.8/$ in the second quarter (Q2) of this fiscal versus 82.7/$ in Q2 of 2024, the report points out.
The country’s foreign exchange reserves have depleted since then, largely on account of the Reserve Bank of India’s (RBI) intervention in the forex market to curb volatility in the rupee. From $692.3 billion at the end of Q2, India’s forex reserves fell to $644.4 billion as of December 20, 2024, the report observed.
The report highlighted that net inflows from foreign portfolio investors were $19.9 billion, surging from inflows of $4.9 billion in the same quarter of the previous fiscal. Equity inflows were $10.7 billion, versus inflows of $3.6 billion. Inflows in debt were $9.1 billion as against $1.7 billion in Q2 of fiscal 2024. The other investments increased to $18.4 billion from $10.6 billion in the second quarter of 2024. NRI deposits increased to $6.2 billion from $3.2 billion, while net external commercial borrowings (ECBs) increased to $5 billion from $1.9 billion outflows last year.
