Currect Account Deficit likely to be 1.5 pc in 2015-16, says HSBC report

The current account deficit is likely to remain at manageable levels of around 1.5 per cent of GDP in the current fiscal despite a marginal rise in oil prices and sluggish manufacturing exports, said an HSBC report.

While risks on the current account deficit are building (rising oil prices, domestic demand recovery and sluggish manufactured exports), we expect the CAD to remain at manageable levels, HSBC Chief India Economist Pranjul Bhandari said in a research note.

Though the above factors pose a potential risk to the CAD going forward, Bhandari said: We think the external accounts will remain at manageable levels (CAD will remain at the 1.5 per cent of GDP ) as long as oil remains under $80 and lower inflation keeps gold imports at reasonable levels.

As per the official data, India's exports contracted by about 14 per cent in April to $22 billion due to a sharp dip in petroleum, gems and jewelery shipments, registering decline for the fifth straight month.

The slump in exports is mainly due to global slowdown and softening of crude, metal and commodity prices. Imports too declined by 7.48 per cent to $33 billion, leaving a trade deficit of $11 billion in April.

Even as gold imports shot up in March and April, HSBC said it is expected to moderate further over the next few months. The CAD, which is the difference between the inflow and outflow of foreign exchange, was 1.7 per cent of GDP ($32.4 billion) in 2013-14.

The CAD in the first half of fiscal year 2014-2015 was 1.9 per cent of GDP ($18 billion).