India's Current Account Deficit To Stay Manageable Despite Trade Pressures: Bank Of Baroda
Date
11/15/2024 2:34:32 PM
(MENAFN- KNN India)
New Delhi, Nov 15 (KNN) bank of Baroda has released a new economic analysis indicating that India's current account deficit (CAD) will remain within a manageable range during fiscal years 2025 and 2026, primarily supported by stable oil prices.
The report emphasises that current oil price levels are particularly beneficial for India's import expenditure, helping to maintain balanced trade dynamics despite global market volatility.
While acknowledging potential pressures from higher commodity prices on India's import costs, the report suggests these increases are expected to be moderate.
However, a significant challenge has emerged as India's merchandise trade deficit reached a 13-month high of USD 27.1 billion in October 2024, driven by increased oil and gold imports.
Despite this concerning trend, export performance has shown resilience, with a notable 17.3 percent growth in October, primarily attributed to non-oil exports.
The fiscal year-to-date trade deficit in FY25 has exceeded previous year's levels, partially due to adjustments in global commodity prices.
The report highlights that future export growth will be contingent on global trade patterns, with rising U.S. protectionist measures potentially impacting India's trade prospects.
The Indian rupee faces near-term pressure, primarily due to external factors including a strengthening U.S. dollar and capital outflows from emerging markets.
Despite these challenges, Bank of Baroda projects India's CAD to remain at a manageable level of 1.2 percent-1.5 percent of GDP in FY25.
However, the report cautions that ongoing capital outflows from the domestic market may continue to exert downward pressure on the rupee, leading to a likely depreciation in the immediate future.
(KNN Bureau)
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