CAD to 1.3% in Q2, visible increase


Of course, the current account surplus in some of the last quarters was caused by a slowdown in imports, reflecting reduced demand for goods in the pandemic-affected economy, rather than any structural improvement.

After a long period of relative comfort, worries seem to be re-emerging on the country’s current account front. In the July-September quarter of the current fiscal account, the account had a deficit of $ 9.6 billion or 1.3% of gross domestic product (GDP), the largest since the first quarter of FY20, RBI he said Friday. Analysts predict a significantly higher deficit in the December quarter, although capital inflows have declined.

The large capital account surplus – $ 40 billion – made possible by the IMF’s $ 17.9 billion SDR allocation – more than made up for the current account deficit in Q2FY22. Based on the balance of payments, there was a net increase in foreign exchange reserves of a solid 31.2 billion dollars in the quarter, almost at the same level as in the period last year, when the current account had a surplus of 15.5 billion dollars.

Of course, the current account surplus in some of the last quarters was caused by a slowdown in imports, reflecting reduced demand for goods in the pandemic-affected economy, rather than any structural improvement.

Aditi Nayar, chief economist at Icre, said: “The current account deficit in the second quarter (22nd fiscal year) was slightly lower than we expected. However, we are facing a big expansion, with a large trade deficit observed in October-November 2021.

She expects the current account deficit to be more than $ 25 billion in the third quarter of fiscal year 22, which will be measured by the size of year-round CAD in fiscal year 20 (before Covid). For the entire 22nd fiscal year, Nayar projected CAD at $ 40-45 billion, or about 1.4% of GDP.

The RBI said: “The current account deficit in Q2-2021-22 is largely the result of widening (commodity) trade deficits to $ 44.4 billion from $ 30.7 billion in the previous quarter and an increase in net investment income outflows.”

In fact, the continued rise in import bills – boosted by significantly higher oil prices and gold purchases, and the release of backlogs during the holiday season – has significantly inflated the trade deficit in recent months, especially since September. In the first two months of the December quarter, the deficit rose to as much as $ 42.6 billion, well above the $ 19.3 billion a year earlier.

At the same time, foreign portfolio investors (FPIs) remained net sellers in the December quarter, after withdrawing shares and bills worth $ 6.4 billion, according to Bloomberg data. So funding for the broader CAD expected in the December quarter looks difficult. As FPIs issued shares in each month of Q3FY22, November witnessed a marginal bond purchase of $ 153.68 million. During the quarter, the FPI withdrew $ 1.7 billion from debt and $ 4.7 billion from shares.

The RBI added: “In the financial account, net foreign direct investment recorded an inflow of $ 9.5 billion (in Q2FY22), down from $ 24.4 billion a year ago. Net foreign portfolio investment this quarter was $ 3.9 billion, compared to $ 7.0 billion in Q2FY21. ”

“India recorded a current account deficit of 0.2% of GDP in H12021-22 compared to a 3% surplus in H12020-21 due to a sharp increase in the trade deficit.”

The Financial Express is now on the Telegram. Click here to join our channel and stay up to date with the latest news and updates from the business.

!function(f,b,e,v,n,t,s)
{if(f.fbq)return;n=f.fbq=function(){n.callMethod?
n.callMethod.apply(n,arguments):n.queue.push(arguments)};
if(!f._fbq)f._fbq=n;n.push=n;n.loaded=!0;n.version=’2.0′;
n.queue=[];t=b.createElement(e);t.async=!0;
t.src=v;s=b.getElementsByTagName(e)[0];
s.parentNode.insertBefore(t,s)}(window, document,’script’,
‘https://connect.facebook.net/en_US/fbevents.js’);
fbq(‘init’, ‘444470064056909’);
fbq(‘track’, ‘PageView’);



Source link

Be the first to comment

Leave a Reply

Your email address will not be published.


*