India's Current Account Deficit to Narrow to 0.7% of GDP: Nomura

New Delhi: India's current account deficit is likely to narrow to 0.7 per cent of GDP in the current financial year from 1.3 per cent in FY15, owing to lower commodity prices, a Nomura report says.

The current account deficit, which occurs when the value of imports and investments is larger than value of exports, is expected to narrow to 0.4 per cent of GDP in the fourth quarter of 2015 from 1.6
per cent of GDP in the previous quarter, the Japanese financial services major said.

"For FY16, despite sluggish export volumes (weak global demand) and rising import volumes (stronger domestic demand and REER appreciation), we expect the current account deficit to narrow to 0.7 per cent of GDP from 1.3 per cent in FY15, owing to lower commodity (particularly oil) prices," Nomura said.

The report noted that much of the weakness in both exports and imports is largely price-driven, owing to low commodity prices.

According to official figures, India's exports contracted 13.6 per cent in January - for the 14th month in a row - to $21 billion.

Imports too shrank 11 per cent to $28.71 billion last month, leaving a trade deficit of $7.63 billion as against $7.87 billion in the same month last year.

Commenting on the trade data, Nomura said that "external headwinds remain strong as seen in falling non-oil export volumes".

"While import volumes have so far been steady, January data show signs of weakness," it had said. 

For the first 10 months of the current fiscal year, cumulative exports declined by 17.65 per cent to $217.67 billion, as against $264.32 billion in April-January period of 2014-15. 

Imports dipped by 15.46 per cent to $324.52 billion for the 10 months, leaving a trade deficit of $106.8 billion, data released by the Commerce Ministry showed.

In the July-September quarter of the current fiscal year, current account deficit rose to $8.2 billion or 1.6 per cent of GDP, from 1.2 per cent or $6.1 billion in the April-June quarter.