India's current account deficit is expected to come down to USD 25 billion, or 1.2 per cent of GDP, in the current financial year, says a report.
CAD, the difference between the inflow and outflow of foreign exchange, in the last fiscal stood at USD 32.4 billion, or 1.7 per cent of the GDP, while it hit a record high of USD 88 billion, or 4.7 per cent of the GDP, in 2012-13.
According to a research report by leading public sector lender SBI, the current account deficit is likely to fall in FY 2015 but could widen next fiscal on the back of pick up in the Indian economy.
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"We expect, FY15 CAD to narrow down further to below USD 25 billion (1.2 per cent of GDP). FY16 may see the CAD widening close to 2 per cent of GDP, with the economy picking up," the SBI's economic research department said.
The current account deficit (CAD) narrowed to USD 8.2 billion (1.6 per cent of GDP) in Q3 FY15 from USD 10.1 billion (2.0 per cent of GDP) in Q2.
CAD has narrowed to 1.7 per cent of the GDP for the first nine months of the current fiscal, driven down by lower oil prices and higher services exports that offset the dip in merchandise shipments.
Crude prices have more than halved between June 2014 and January 2015. In the December quarter alone crude prices have fallen around 60 per cent.
"The softening of the CAD in Q3 FY15 was primarily on account of net exports of services which picked up on the back of an improvement in net earnings through travel and software services, and lower net outflows under primary income (profit, dividend and interest)," the SBI report added.
As per the report, net portfolio capital inflows in FY15 have crossed USD 44 billion (by 11 March, 2015) and net direct investment reached USD 30.3 billion in the first 10 months of FY15. Moreover, net FII and FDI inflow have crossed USD 73 billion in FY15, highest inflow ever since FY91.
"Notably, stable capital flows (portfolio equity and direct investment to total reserves) is now at 14.5 per cent, a 5 year high. Additionally, import cover is now at a 4 year high," the report added.
