India's Q1 current account to be in surplus: Citigroup

Icorporating August trade data, the trends are pointing to a broadly balanced current account in the second quarter of this fiscal year as well, says Citigroup

The country's current account is likely to be in surplus in the first quarter of this financial year, says a Citigroup report.

According to the global financial services major, trade deficit is stabilising at lower levels, and incorporating August trade data, the trends are pointing to a "broadly balanced" current account scenario.

"Following a moderate current account deficit of $.4 billion or (-) 0.1 per cent of GDP in January-March quarter, we expect current account to come in at a surplus of $2 billion or 0.4 per cent of GDP in April-June quarter," Citigroup said in a research note.

India's trade deficit stood at $7.7 billion in August, almost unchanged in the last three months and significantly below the average monthly trade deficit of $9.9 billion last fiscal.

Imports contracted by 14 per cent year-on-year to $29.2 billion in August, while exports were down only 0.3 per cent year-on-year to $21.5 billion.

The report further noted that "incorporating August trade data, the trends are pointing to a broadly balanced current account in the second quarter of this fiscal year (July-September) as well".

India's gold imports stayed subdued at $1.1 billion (down 77 per cent year-on-year) in August similar to the trend seen in last 7 months. Besides, import of base metals, ores and minerals also recorded double-digit declines in August.

Moreover, among key trading partners, export to the US (largest export destination for India) fell by 1.1 per cent year-on-year in April-July period while imports from China (largest exporter to India) fell by 7.4 per cent year-on-year in the same period.

"This could introduce downside risks to our 2016-17 current account deficit estimate of 0.9 per cent of GDP especially if crude price remains soft in the second half," Citigroup said.