CAD likely to be 1.6% of GDP in FY15: Nomura

The global financial services major revised its current account deficit forecast upwards from its previous forecast of 1.3%

India's current account deficit is likely to be around 1.6% of GDP in the current financial year amid higher imports, Japanese brokerage firm Nomura has said.

The global financial services major revised its current account deficit forecast upwards to 1.6% of GDP in FY15 (year ending March 2015) from its previous forecast of 1.3%.

The largest component in computing CAD is trade deficit. India's trade deficit widened to one-and-a-half year high of $16.86 billion in November due to over six-fold jump in gold imports even as merchandise exports grew by 7.27%.

There has been a surge in gold imports over the last few months, following the relaxation of import restrictions in May this year, but the gold demand is expected to subside in the coming months.

"We believe most of the surge was driven by festive demand. As the festive season comes to an end, gold demand should subside," Nomura said in a research note.

Gold imports stood at $5.61 billion in November this year as against $835.83 million in the corresponding month in 2013, according to the data released by Commerce Ministry.

Moreover, lower oil prices should offset part of the increase in non-oil/non-gold imports which is expected to rise as domestic demand picks up, the report said.

"Overall, with imports slightly higher, we are revising up our current account deficit forecast to 1.6% of GDP in FY15 from our previous forecast of 1.3%," Nomura said.

According to official figures, CAD widened to 2.1% due to rising gold imports in the second quarter of this fiscal, up from 1.2% a year ago.