CAD slips to 1% of GDP in O2, experts peg range of 1.5-1.8 % of GDP

India’s current account deficit posted a sharp decline to 1 per cent of the GDP at USD 8.3 billion in the September quarter of the current fiscal 2023-24, lower than the deficit of 1.1 per cent of the GDP at USD 9.2 billion in the first quarter of FY24 and deficit of 3.8 per cent of the GDP at USD 30.9 billion posted in the year-ago period -- Q2FY23, RBI data on Tuesday showed.

- NIVEDITA MUKHERJEE

The Central bank attributed the lower CAD in Q2FY24 to the narrowing of the merchandise trade deficit to USD 61.0 billion from USD 78.3 billion in Q2FY23. Services exports grew by 4.2 per cent on a y-o-y basis on the back of rising exports of software, business and travel services. Net services receipts increased both sequentially and on a y-o-y basis. The CAD for Q2 FY2024 printed well below expectation of ICRA Ratings, led primarily by, what Aditi Nayar Chief Economist ICRA finds, a "smaller-than-anticipated merchandise trade deficit". Nayar is of the view that following the expansion in the merchandise trade deficit in October 2023, the CAD for the ongoing quarter is expected to widen appreciably, to around USD18-20 billion. "Nevertheless, we now foresee the FY2024 CAD in a range of 1.5-1.6 per cent of GDP, unless commodity prices chart a sharp rebound," says Nayar.