India’s current account deficit (CAD) has widened in the first quarter of the fiscal year 2023/24, primarily due to a higher trade deficit, lower net services surplus, and a drop in private transfer receipts. The CAD expanded to $9.2 billion, or 1.1% of GDP, compared to $1.3 billion in the previous quarter. This widening is driven by a merchandise trade deficit that increased to $56.6 billion in the quarter and a decrease in net services receipts, particularly in travel, business services, and computer exports.
While the Q1 CAD is narrower than the same period a year ago when it was $17.9 billion, analysts predict a substantial widening in the July-September quarter due to worsening trade balance, rising oil and core imports, and a slowdown in services exports. Madhavi Arora, lead economist at Emkay Global Financial Services, estimates that the CAD/GDP ratio for Q2 could range from 2.4% to 2.6%, more than double that of the first quarter.
India’s trade deficit had previously widened more than expected in August, reaching $24.16 billion.
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