Mumbai: The country's current account deficit (CAD) is likely to widen to a 13-quarter high of USD 23.6 billion or 2.8 percent of GDP in October-December 2021-22 due to higher commodity prices following the Russia-Ukraine conflict, India Ratings and Research (IND Ra) said in a report.
The report said although the Omicron-led Covid wave has subsided, the geopolitical risks to the global recovery have increased due to the Russia-Ukraine conflict.
"We expect the CAD to come in at the second-highest level of USD 23.6 billion (2.8 percent of GDP; 13-quarter higher) in Q3 FY22 as against a deficit of USD 9.6 billion (1.3 percent of GDP) in Q2 FYZ2, the agency said In Q3 FY21, the deficit was USD 2.2 billion (0.3 percent of GDP)
The direct effects of the Russia Ukraine conflict have pushed commodity prices and freight and transportation costs higher; crude od prices have been on a boil, it said.
In addition, the Indian rupee, which averaged at 75 against the dollar in February 2022, is expected to average around 76 this month, which might result in a depreciation of 0.29 percent in the fourth-quarter over the previous three-month period, 166 billion in Q4 FY22 the report said.
The agency said that despite the adverse effects of the Russia Ukraine conflict.
the merchandise imports are likely to recover further due to the normalizing domestic economy, higher commodity prices, and depreciation of the rupee, pushing the merchandise imports hill to over USD
The FY22 merchandise import bill is estimated at an all-time high of over USD 606 billion, it said. However, the agency believes that merchandise experts might be constrained to USD 1013 billion in Q4 FY22, taking it to USD 406 billion in FY22
As a result, the merchandise trade deficit is likely to come at USD 200 billion in FY22. All in all, CAD is expected at over USD 25 billion in Q4 FY22, the report said.
Source: PTI
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