India’s current account deficit widened marginally to 1.1% of GDP in Q1 FY25 from 1.0% in Q1 FY24
Download ReportQuantEco Research || Q1 FY25 BoP - Comfort prevails despite marginal risks
India’s current account deficit widened marginally to 1.1% of GDP in Q1 FY25 from 1.0% in Q1 FY24. The accompanying net balance of payments position registered a moderate surplus of USD 5.2 bn in Q1 FY25, lower than the surplus of USD 24.4 bn seen in the corresponding quarter in FY24. Although the current account deficit remained broadly unchanged, the drivers underwent a change with incremental widening of the merchandise trade deficit being offset by an incremental improvement in the services trade surplus. Cut in custom duties in the FY25 Union Budget has provided an impetus to import of precious metals. As such, we raise our FY25 current account deficit forecast to 1.2% of GDP from 0.9% earlier, while keeping a close eye on potential adverse spillovers to international trade from escalation in geopolitical tensions in the Middle East. In the absence of any material worsening of the geopolitical environment, India should continue to attract global capital flows on account of bond index inclusion and a decisive turn in monetary policy by most central banks. As such, we retain our FY25 BoP forecast of USD 50 bn surplus.