Current account deficit to be closer to 1.3% of GDP: India Ratings

The current account deficit for the current fiscal is likely to come in close to 1.3% of the GDP, India Ratings and Research (Ind-Ra) said today.

CAD narrowed to 1.4% in April-December, from 1.7% in the corresponding period of 2014-15.

"Ind-Ra expects the CAD to come in close to 1.3% of GDP in FY16," the agency said in a statement.

CAD, difference between inflow and outflow of foreign exchange, came in at 1.3% in 2014-15, 1.7% in 2013-14 and a record high of 4.8% of GDP in 2012-13.

For the third quarter of current fiscal, CAD was at $7.1 billion (1.3% of GDP), sequentially lower than $8.7 billion (1.7% of GDP) in second quarter.

It was also lower than $7.7 billion (1.5%of GDP) in third quarter of last fiscal.

"Ind-Ra expects improved performance in FDI to continue as India's economic growth improves gradually in 2016-2017 compared to that in 2015-2016. The focus on Make in India will attract larger and more stable FDIs," it said.

In the October-December quarter of fiscal, forex reserves increased by $4.1 billion mainly because of higher FDI flows under the capital account.

The net receipt under the capital account rose to $10.5 billion in third quarter, from $8.6 billion in second quarter.