CAD to widen to USD 25 bn in FY17 on gold imports surge:Report

The country's current account deficit is likely to widen modestly to USD 25 billion in the current fiscal from USD 20 billion last year on rising demand for gold and sluggishness in exports, a report said today.
"A favourable monsoon after a gap of two years would have a mixed impact on trade in various sectors, boosting agricultural exports and limiting imports of crude oil and coal while enhancing the demand for gold," domestic ratings agency Icra said.
It expects current account deficit (CAD) to widen modestly to USD 25 billion this fiscal, from an estimated USD 20 billion in 2015-16, but be comfortably covered by capital inflows.

"Any sustained rally in commodity prices, particularly crude oil, would boost the import bill while simultaneously counteracting the risk posed by lower remittances," Icra Senior Economist Aditi Nayar said.
A meaningful recovery in merchandise exports is unlikely to set in during 2016-17 given the sluggish outlook for global trade flows, she added.
With tepid global growth prospects, merchandise exports are likely to remain slack despite a limited boost from the schemes introduced by the government to spur shipments, Nayar said.

Icra expects a step-down in the net oil import bill for the third consecutive year, benefiting from lower average crude oil prices as well as irrigation-related demand for diesel in the backdrop of a favourable monsoon in 2016.

Assuming a decline in average crude oil prices to USD 42/barrel in FY17 from USD 46/barrel in FY16, Icra anticipates India's net oil imports to moderate to USD 51.5 billion from USD 53.5 billion.
It expects the gold import bill to rise to USD 38 billion this fiscal from USD 32 billion in 2015-16.
It said with the jewellers' strike leading to a slump in gold imports in March 2016, the current account balance for the fourth quarter of 2015-16 may record a small surplus after a gap of 35 quarters.
Benefiting from this, Icra estimates that India's current account deficit eased to USD 20 billion in FY16 from USD 27 billion in FY15.