'India's current account deficit to touch $30bn in 2018'

India's current account deficit is expected to increase by $10 billion to $30 billion in the 2017-18 fiscal due to higher oil and gold imports, credit rating agency ICRA said on Thursday.

However, the pressure related to the financing of a larger current account deficit would abate with the resumption of Non-Resident Indian (NRI) deposits in 2018.

The ICRA expects a rise in the prices and import volumes of crude oil and gold to enlarge the Indian current account deficit to around $30 billion in 2018 from around $20 billion in 2017.

"While merchandise exports may rise by 5-6 per cent in 2018, partly led by the higher value of commodity-intensive exports, global trends do not augur well for a significant improvement in the services trade surplus and remittances in 2018," Aditi Nayar, principal economist at the ICRA was quoted as saying in a statement.

"Since 2014, a combination of lower crude oil and/or gold imports has helped curtail India's current account deficit, absorbing the impact of declining merchandise exports, services trade surplus or remittances in some of these years. This cushion would not be available in 2018," Nayar added.

The ICRA expects average crude oil price to go up to $55 per barrel in 2018 from around $48/barrel in 2017.

Accordingly, net oil imports are expected to expand by 24 per cent to around $67 billion in 2018 from around $54 billion in 2017, emerging as the chief driver of the anticipated widening of the current account deficit.

The ICRA also expects imports of fertiliser to go up marginally to $5.4 billion while that of coal coming down to $13.6 billion next fiscal.

The outlook for exports remains subdued, given the global political landscape, especially the upcoming elections in major European countries, Brexit negotiations and the US trade policy.

Such uncertainty may curtail the growth of India's merchandise exports in the coming quarters, despite the rise in the value of commodity-intensive exports.

The rating agency also said the trade deficit-difference between imports and exports- to increase to around $125 billion from $114 billion in 2017.

Global trends do not augur well for a significant improvement in the services trade surplus and remittances in 2018, from the levels in 2017.

According to ICRA, resumption of NRI deposit inflows, along with sustained healthy FDI flows, would abate the pressure related to the financing of a larger current account deficit in 2018.

--IANS

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