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India’s current account deficit narrowed to $13.4 billion in Q4 FY22 (down 1.5% of gross domestic product) from a 36-quarter high of $22.2 billion in Q3 FY22 (down 2.6% of GDP), on account of a lower merchandise trade deficit and rise in secondary income inflows.
With a sharper YoY expansion in imports (up 45.5%) relative to exports (up 25.5%) in April-May FY23, India’s merchandise trade deficit has more-than doubled to $44.4 billion in this period from $21.8 billion in April-May FY22, partly led by a surge in gold imports.
We foresee the current account deficit to widen to $26 billion in Q1 FY23, from $13.4 billion in Q4 FY22, bloated by higher commodity prices. In FY23, the CAD may touch a fresh high of $100 billion or 2.9% of GDP, with crude oil price expected in the range of $100-120/barrel of oil, and growth of imports outpacing that of exports.
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