CAD expected to be around 1.4% of GDP in 2017: Nomura

The key risks are rise in protectionism, weaker global growth or a surge in oil prices

India's current account deficit is expected to be around 1.4 per cent of GDP in 2017 compared to 0.6 per cent in 2016, owing to stronger domestic growth, says a report.

The Japanese financial services major Nomura has revised India's 2017 CAD forecast to 1.4 per cent of GDP from 1.6 per cent earlier, but still expects current account deficit to be higher than the 2016 figure.

Nomura expects India's CAD to widen in 2017 against last year as import growth should pick up in the second half 2017 due to a stronger domestic recovery, even as protectionist policies will likely hurt services exports.

"We are revising our 2017 CAD forecast to 1.4 per cent of GDP (as against 1.6 per cent earlier) but we still expect it to be wider than in 2016 (0.6 per cent) owing to stronger domestic growth," Nomura said in a research note.

The key risks to this outlook are rise in protectionism, weaker global growth or a surge in oil prices.

According to Reserve Bank of India, the current account deficit soared to $ 3.4 billion, or 0.6 per cent of gross domestic product (GDP) in the fourth quarter of fiscal 2017, compared to $ 0.3 billion a year ago.

For the full fiscal 2017, CAD narrowed to 0.7 per cent of GDP compared to 1.1 per cent in the previous fiscal on the back of a contraction in trade deficit.

Commenting on the first quarter CAD data, Nomura said it was better than expected and the positive surprise was led by a narrower merchandise trade deficit and moderation in investment outflows.