As India’s current account deficit (CAD) narrowed to a lower-than-expected USD 8.3 billion in Q2 FY2024, the higher trade deficit is likely to push CAD sharply to USD 18 to 20 billion in Q3 FY2024, the rating agency Icra has said.
Although India’s CAD narrowed slightly on a QoQ basis in Q2 FY2024, the sharp fall in financial flows led to a significant dip in reserve accretion in the quarter vis-à-vis Q1 FY2024.
On a YoY basis, the merchandise trade deficit narrowed to USD 61.0 billion in Q2 FY2024 from USD 78.3 billion in Q2 FY2023, amidst a sharper dip in imports (-10.9 per cent), relative to exports (-3.0 per cent), given the correction in global commodity prices as well as a slowdown in external demand.
The imports of petroleum, crude and products contracted by a steep 23.6 per cent YoY in Q2 FY2024 (to USD 40.8 billion in Q2 FY2024 from USD 53.4 billion in Q2 FY2023, amid a 12 per cent decline in the price of the Indian basket of crude oil). In contrast, gold imports rose to USD 12.6 billion from USD 9.8 billion, partly led by a low base, pre-festive demand, etc.
Non-oil non-gold imports reported an 8.5 per cent year-on-year (YoY) dip in Q2 FY2024, on a BoP basis.
While oil exports fell by 4.6 per cent YoY in Q2 FY2024, non-oil items saw a narrower 2.6 per cent moderation (on a BoP basis) amidst the continued weakness in external demand.
