India’s Current Account Deficit (CAD) widened to USD 9.2 bn (1.1% of GDP) in Q1 FY24 from USD 1.3 bn (0.2% of GDP) in Q4 FY23, but fared substantially better than USD 17.4 bn (2.1% of GDP) a year ago
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India’s Current Account Deficit (CAD) widened to USD 9.2 bn (1.1% of GDP) in Q1 FY24 from USD 1.3 bn (0.2% of GDP) in Q4 FY23. The accompanying net Balance of Payments (BoP) surplus rose to USD 24.4 bn from USD 5.6 bn a quarter ago, led by strong net portfolio flows within capital account. Despite the sequential widening of current account deficit, the Q1 FY24 BoP in a robust surplus USD 24.4 bn – the highest in nearly 7 quarters, lends the overall data a positive overtone. On the other hand, capital flows could continue to remain somewhat robust. Though the pace of net portfolio inflows has moderated in Q2 FY24, but still reflects strength. This coupled with India’s inclusion in J.P Morgan Bond Index could augur well for attracting higher debt capital flows. As such, we now revise our FY24 CAD forecast up to USD 67 bn (1.9% of GDP) – at par with FY23 level, up from our expected USD 53 bn (1.4% of GDP) earlier. This we juxtapose against now a wider BoP surplus to the tune of USD 32 bn compared to our expectation of USD 24 bn earlier.