With the trade deficit down, economic research agencies have lowered the estimate for the current account deficit – the difference between payment made and received in dollar.
Leading research firm, Nomura said that the current account deficit should remain in check based on expectations of improving global growth momentum (positive for exports), weak domestic demand (lower imports) and policy restrictions on gold.
“With all three conditions likely to continue in the coming months, we lower our current account deficit forecast to 1.9 per cent of GDP in Financial Year 2014 (2013-14) from 2.5 per cent,” the firm’s analysts Sonal Verma and Aman Mohunta said in a note.
Another firm, India Ratings is likely to revise its estimate for the deficit next week.
However, for the third quarter ending December 31, 2013, the agency expects the deficit (CAD) to decline to 1.1 per cent against 6.7 per cent in third quarter of 2012-13. The agency believes that import growth will pick up somewhat in the on-going quarter of January-April.
Crisil said trade deficit for October to December quarter is at $29.9 billion, the same as it was in the July-September quarter.
Given this, and with services export growth in third quarter is expected to be at least similar to that in the second quarter (in line with global recovery), India’s current account deficit is likely to remain close to the level seen in second quarter which was 1.2 per cent of GDP.
shishir.s@thehindu.co.in