Global financial services provider Barclays has said India's current account deficit (CAD) likely to remain elevated at 3.6% of the GDP in the current fiscal, though lower than the record high of 4.2% in 2011-12.
The current weaker international oil prices and likely lower gold imports during 2012-13 could be silver linings, "but on balance, the current account deficit is still set to stay elevated," it said.
Estimates for 2012-13 CAD is 3.6% of GDP, Barclays said in report. CAD represents the difference between exports and imports after considering cash remittances and payments.
Barclays said the services trade surplus and remittances inflows could remain supportive during the current fiscal.
It further said the pace and timing of capital flows in India will be determined to a great extent by international liquidity and risk sentiment, which are likely to remain uncertain in the near term.
The recent policy support, like hike in FII investment quota in bonds and easing in ECB norms, could offer pockets of support over the medium term, it said.
On the domestic currency, Barclays said the near-term rupee trajectory will likely be influenced by global developments and risk sentiment rather than BoP fundamentals.
"This has been the case in the recent past, when rupee had seen phases of continued weakening, in line with deterioration of global risk sentiment, rather than reacting to the fundamental positives of softer oil prices," it said.
On BoP (Balance of Payment), Barclays said the fundamentals are unlikely to change dramatically in the coming quarters amid likelihood of continued high merchandise trade deficit.
In the financial year 2011-12, the overall BoP moved into a deficit of about $13 billion, in contrast to the 2010-11 surplus of about $13 billion.
In another report, it said, SEBI's tomorrow auction of the recently increased bond holding limits for FII is likely to generate modest response.
Barclays said in its view, the lack of a "fast-track" approval process and fact that 'limit' auctions will now take place regularly (on the 20th of each month) may result in investors bidding less aggressively than they would have done.
RBI increased FII limit in government bonds to $20 billion, while allowing up to $10 billion from overseas borrowings by India Inc for refinancing rupee loan.
