Citi pegs CAD at 1.7 pc at USD 37 bn in FY15

Leading American brokerage Citi today said it expects India's current account deficit to remain under 2 per cent this fiscal due to softer crude price and continuing curbs on gold imports, notwithstanding the spike in inward shipments of gold and coal in September.
Despite the April-September trade deficit at USD 70.4 billion inched closer to the year-ago period at USD 76.7 billion, we expect the total FY15 CAD to remain in check at USD 36.7 billion or 1.8 per cent of GDP due to softer crude and continuing curbs on gold imports, Citi said in a report.
The largest component in computing CAD is trade deficit.

In September, trade deficit widened to USD 14.2 billion from USD 10.8 billion in August on account of a sharp uptick in imports and subdued trends in exports growth.
The spike was mainly due to gold imports which rose to USD 3.8 billion in September from USD 2 billion last month, possibly reflecting festival season demand it said. In September, exports rose 2.8 percent to USDx28.9 billion while imports soared 26 per cent to USD 43.2 billion.
Attributing the spike in imports to festive demand and base effect, it said falling crude prices will temper the import bill going forward.

While gold imports rose 470 per cent to USD 3.8 billion, non-oil, non-gold imports stood at USD 24.9 billion, up 22.2 per cent, while petroleum products and electronic goods were down 4.6 per cent and 17 per cent respectively.
Explaining its optimism on lower CAD, it said it expects stable trends (from 1.7 per cent to 1.8 per cent) to continue in FY15. Our assumptions include exports rising 7.5 per cent (Apr-Sep growth at 6.5 per cent); gold imports at USD 30 billion based on 725 tonne and prices at USD1250/oz (Apr-Sep imports at USD 15 billion); oil prices averaging USD100/bbl; non-oil/non-gold imports up 11.8 per cent which is in line with a gradual pickup in GDP growth.

It also noted a series of policy measures with favourable global developments brought the FY14 CAD down to 1.7 per cent of GDP from record high levels of over 4 per cent in FY12 and FY13.