India's current account balance to achieve surplus of around $6 billion in Q4FY24: Ind-Ra

06 Jun 2024 Evaluate

India Ratings and Research (Ind-Ra) has anticipated that India's current account balance (CAB) will achieve a surplus of around $6 billion (0.6 per cent of GDP) in the fourth quarter of the fiscal year 2024 (Q4FY24). This marks the first surplus since the first quarter of fiscal year 2022 (1QFY22), a significant turnaround from the previous quarter's deficit of $10.5 billion (1.2 per cent of GDP). Despite this positive quarter, the overall CAB for FY24 is expected to remain in deficit at 0.6 per cent of GDP, the lowest since FY17, excluding the pandemic-affected FY21.

It said the global economic environment, though still uncertain, is showing signs of improvement for 2024. Easing inflationary pressures and robust economic growth in the US and several emerging markets contribute to a brighter outlook. The global manufacturing Purchasing Managers' Index (PMI) has been expanding for three consecutive months, reaching 50.3 in April 2024, with consistent growth in the US and emerging economies, except for the European region.

Ind-Ra forecasts a sharp increase in merchandise exports to about $112 billion in 1QFY25, an 8 per cent year-on-year (YoY) rise, the fastest in seven quarters, partly due to a favorable base effect. Merchandise imports are expected to reach $169 billion in the same period, up 6 per cent YoY, resulting in a goods trade deficit of $57 billion. Services exports, although resilient, are anticipated to see slower growth due to a high base effect and weakening demand in IT/ITES, with a services trade surplus increasing by 6.5 per cent YoY to $38 billion. Consequently, the CAB is expected to register a marginal deficit in 1QFY25.