India's current account deficit is expected to be around 1.3 per cent of GDP in 2017 as against a deficit of 0.8 per cent in 2016, says a report.
According to Japanese financial services major Nomura, as the cash crunch eases from April-June quarter of this year the country's import growth is expected to rebound faster than the export growth.
The improvement in exports along with the moderation in gold imports narrowed the trade deficit to USD 10.4 billion in December from a 16-month high of USD 13 billion in November.
According to official figures gold imports during December declined by 48.49 per cent to USD 1.96 billion.
"The trade data suggest that exports managed to recover in December despite the cash crunch induced by demonetisation, but weak core import volumes suggest that domestic demand has been hit," Nomura said in a research note.
"We remain cautious on the export outlook for the next few months as the cash crunch could take a toll on exports despite improving global demand," Nomura said, adding that core import growth is also expected to remain subdued as well due to demonetisation.
It further said that "given the larger trade deficit in November, we expect the current account deficit to widen to 2.5 per cent of GDP in fourth quarter of 2016 versus a deficit of 0.6 per cent in the third quarter of 2016".
Nomura expects current account deficit to widen to 1.3 per cent of GDP in 2017 versus a deficit of 0.8 per cent in 2016.
Disclaimer: No Business Standard Journalist was involved in creation of this content
