Falling exports and high crude prices are set to push up current account deficit in the second quarter to a 37-quarter high of 4.4% of GDP at $36 billion as against $9.7 billion or 1.3% in the year-ago period, estimates a report.
As a percentage of GDP, the previous high was in the first quarter of 2013-14 when CAD had scaled to 4.7%, but in absolute terms the previous high was in the third quarter of 2012-13 when it touched $31.8 billion.
In the first quarter of this fiscal the deficit was $23.9 billion or 2.8%, according to an assessment by India Ratings.
Global headwinds facing merchandise exports had the shipments contracting by close to 20% in October 2022, first time since February 2021 and the agency expects merchandise exports to slip to an eight-quarter low of $88.2 billion in Q3FY23 which would be 17.4% lower than Q3FY22.
On the other side, falling commodity prices will help the country lower its import bill in the third quarter (Q3), even though crude prices were still 19.9% in October-November. And the agency expects merchandise imports to decelerate to a three-quarter low of $171.9 billion in Q3, but will still be up 2.9% on-year.
Overall, merchandise trade deficit will rise to a fresh high of $83.7 billion in Q3, which is 38.9% higher than Q3FY22, according to its estimate.
The agency expects the rupee to average 81.8 against the U.S. dollar, up 9.1% in Q3, further putting pressure on CAD.
As against this merchandise exports stood at a three-quarter low of $ 112.5 billion in Q2FY23, up from$121.1 billion in Q1 due to the impact of global headwinds such as the Russia-Ukraine conflict, global growth slowdown and elevated inflation.
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