India’s current account deficit moderated to 1.0% of GDP (USD 8.3 bn) in Q2 FY24 vis-à-vis 3.8% of GDP (USD 30.9 bn) in Q2 FY23
Download ReportQuantEco Research || Q1 FY24 BoP - Headline comfort prevails
India’s current account deficit moderated to 1.0% of GDP (USD 8.3 bn) in Q2 FY24 vis-à-vis 3.8% of GDP (USD 30.9 bn) in Q2 FY23. The accompanying net balance of payments position registered a mild surplus of 0.3% of GDP (USD 2.5 bn) in Q2 FY24, in contrast to a significant deficit of 3.7% of GDP (USD 30.4 bn) in Q2 FY23.
The dynamics on current and capital account provide an overall sense of stability on India’s BoP despite isolated areas of concern. For the fourth consecutive quarter, the current account gap has printed under 2% of GDP, which is generally considered to be a sustainable line in the sand from a funding perspective. Cyclical moderation in international commodity prices along with a structural improvement in services surplus have been a key source of comfort for India’s current account deficit. On the capital account front, lingering weakness in direct investments is getting offset by cyclical optimism on portfolio investments. We now believe that there is a downside risk to our FY24 current account deficit estimate of USD 67 bn, which in turn could manifest via a somewhat higher than projected BoP surplus of USD 32 bn in the year.