India’s current account deficit moderated to 1.2% of GDP (USD 10.5 bn) in Q3 FY24 from 2.0% of GDP (USD 16.8 bn) in Q3 FY23

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Mar 26, 2024

QuantEco Research || Q3 FY24 BoP - Comfort on deficit as well as funding

The dynamics on current and capital account continue to provide a sense of stability to India’s Balance of Payments. For the fourth consecutive quarter, the current account gap has printed under 2.0% of GDP, which is generally considered to be a sustainable line in the sand from a funding perspective. 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, subdued momentum in direct investments is getting offset by cyclical optimism on portfolio flows, which is further aided by India’s inclusion in EM bond indices. We maintain our FY24 and FY25 current account deficit forecasts at 0.8% and 1.0% of GDP respectively. The forecast for FY24 and FY25 BoP is also maintained at USD 58 bn and USD 52 bn respectively.