India's Current Account Deficit Contracts Sharply To $1.3 Billion In Q4 FY23

India's current account deficit (CAD) witnessed a significant contraction, narrowing sharply to $1.3 billion in the fourth quarter of FY23, Reuters Reported.

In the final quarter of the 2022-23 fiscal year, the current account balance (INCURA=ECI) most likely showed a surplus of $3.3 billion, or 0.4% of gross domestic product (GDP), according to the most recent survey of 22 experts.

The deficit for the previous quarter was $18.2 billion, or 2.2% of GDP, so it would be a big improvement. Forecasts differed greatly, from a $5.0 billion deficit to a $7.8 billion surplus.

"While we expect the merchandise trade deficit to narrow, led by moderating global commodity prices, the invisible trade balance should remain steady at previous quarter levels, with a pick-up in services exports," said Upasana Chachra, chief India economist at Morgan Stanley.

"On the capital account front, we expect foreign flows to slow. With regard to the overall (balance of payments) ... we anticipate the surplus to remain largely steady, similar to previous quarters' levels."

According to the poll, the balance of payments (INBOP=ECI) was predicted to have a $9.8 billion surplus in the most recent quarter, down from $11.1 billion in the previous three months.

In comparison to the fiscal year that just finished, the current account deficit (CAD) was predicted to average -1.5% of GDP this fiscal year and -1.8% the following, according to a separate Reuters poll released last week.

"With oil prices lower, the trade deficit is likely to shrink, ensuring the CAD narrows further," wrote Prasenjit K. Basu, chief economist at ICICI Securities.