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India’s current account deficit (CAD) at 36-qtr high of $23b

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BBN Bureau

Merchandise trade deficit surged to $60.4 billion in Q3

MUMBAI/April 01-2022: India’s current account deficit (CAD) surged to a 36-quarter high of $23 billion (-2.7 per cent of GDP) in Q3 FY2022 from $9.9 billion (-1.3% of GDP) in Q2 FY2022.

ICRA, the leading rating agency, says however, the Q3 FY2022 deficit has undershot the lower end of the agency’s expectation band of $24-28 billion, with a better than anticipated outcome for the balances of goods, services and secondary income.

The sequential widening of the deficit, according to ICRA, was on account of the spike in merchandise trade deficit to $60.4 billion in Q3 FY2022 from $44.4 billion in Q2 FY2022. “We expect the current account deficit to recede to around $17-21 billion in Q4 FY2022, with the third wave temporarily curtailing certain imports,” it said in a statement issued today (April 1).
Accordingly, ICRA says, the CAD in FY2022 is projected at $43-47 billion or 1.5 per cent of GDP. For FY2023, if the ongoing geo-political tensions between Ukraine and Russia push up the average price of the Indian crude oil basket to $105/bbl, then the CAD is projected to widen to $90-95 billion (2.6 per cent of GDP).

“Nevertheless, the merchandise trade and CAD projections for FY2023 will be contingent upon commodity price movements and the duration of the ongoing geopolitical conflict as well as supply chain implications amid lockdown in China,” ICRA added.

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