India May Have Attained A Surplus In Its Current Account, Say Experts

Weakening of commodity prices, strong services exports and rising remittances by people working abroad likely pushed India’s current account balance to surplus in the quarter ended March. In that case, the country will be reporting current account surplus after a gap of six quarters, and experts are hopeful the gains will continue this quarter.

“India’s external financing needs have shrunk dramatically in the past few quarters, helped by falling commodity prices, an expanding services trade surplus and rising remittances,” said Rahul Bajoria, head of EM Asia (ex-China) economics research at Barclays, positing a surplus in the fourth quarter.

India Ratings and Research (Ind-Ra) has projected a current account surplus of $6 billion, or 0.7% of the gross domestic product (GDP), in the January-March quarter.

The country posted a current account deficit of $18.2 billion, or 2.2% of the GDP, in the third quarter of FY23 ended December.

Buoyed by services exports, Ind-Ra expects the trend to continue in the current quarter.

“Ind-Ra expects the services surplus to come in at a record high of around $42 billion in Q1 FY24,” said Paras Jasrai, senior analyst at the ratings agency. Jasrai noted that services demand has held firm despite global goods demand remaining anaemic.

Service exports jumped over 40% in FY23, according to government data last month.

Although the current account balance is likely to post a 1.8% deficit as a proportion of GDP in FY23 – a four-year high-experts indicate a lower deficit in the current fiscal.

Barclays in a report released on Tuesday lowered its current account deficit forecast for FY24 to 1.1% from 1.4% earlier.