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Motilal Oswal Report
India's current account deficit narrowed sharply to $18.2 billion (or 2.2% of gross domestic product) in Q3 FY23, much lower than consensus expectation of $23.1 billion and our expectation of $25 billion.
More importantly, Q2 FY23 CAD has been sharply reduced to $30.8 billion (or 3.7% of GDP) from $36.4 billion (or 4.4% of GDP) reported earlier. Accordingly, India's CAD stands at $67 billion (or 2.7% of GDP) in nine months-FY23, much lower than previously feared.
The narrowing of CAD in Q3 was partly on account of a lower merchandise trade deficit ($72.7 billion in Q3 FY23 versus $78.3 billion in Q2 FY23) coupled with a higher invisibles surplus ($54.4 billion in Q3 FY23 versus $47.4 billion in Q2 FY23).
Lower merchandise trade deficit can be explained by a sharper fall in goods imports vis-a-vis exports, particularly petroleum products and gold. Within invisibles, services and transfer receipts remained robust with higher surplus in Q3 FY23.
Notably, India's CAD, excluding gold stood at $10.1 billion (or 1.2% of GDP) in Q3 FY23, sharply lower than $21.1 billion in Q2 FY23. India's current account surplus, excluding petroleum products, increased to $15.8 billion (or 1.9% of GDP) in Q3 FY23 from only $4.3 billion (or 0.5% of GDP) in Q2 FY23.
Similarly, the current account surplus, excluding gold and petroleum products, jumped up to $23.9 biliion (or 2.8% of GDP) during the quarter.
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