Current account likely to swing into surplus in 2015

The country's current, account which has been continuously in the deficit over the last 10 years, is likely to swing into positive territory with a surplus at 0.3 per cent of GDP in 2015, according to a Morgan Stanley report.

According to the global brokerage firm, declining global commodity prices (specifically oil) and improving terms of trade are likely to help current account to swing into surplus for the first time since 2004.

The current account deficit (CAD) had narrowed steadily since 2012 to an estimated 1.6 per cent of GDP in 2014. "We now estimate that the current account will swing into a minor surplus of 0.3 per cent of GDP in 2015," Morgan Stanley said in a research note.

Since June, prices of crude oil, of which India is a major importer, had fallen by close to 60 per cent and hit a six-year low of $47 this month. The report noted that the substantial improvement in CAD bodes well from a macro stability viewpoint.

CAD stood at 1.9 per cent in the first quarter of this fiscal, 1.1 per cent in the June quarter and 1.3 per cent of GDP in the September quarter. The sharp decline in gold imports, due to curbs imposed by the government, was another factor that helped to reduce CAD.

However, there is some reason for concern as gold imports, which had come down sharply in the first half of the current fiscal, have been rising. Switzerland's gold exports to India crossed Rs 1.2 lakh crore in 2014 even as concerns persist over bullion being used to channel illicit funds into India.

According to Swiss government data, last November alone saw import of bullion worth over 2.9 billion Swiss francs (around Rs 20,000 crore) from the Alpine nation. Latest data from the Swiss Customs Administration showed that more than 457 kg of gold was exported from the Alpine nation to India during January-November 2014.

At the end of November 2014, India remained the biggest destination for gold exports from Switzerland.

According to latest figures from the Indian government, overall gold imports surged more than sixfold to $5.61 billion (over Rs 35,000 crore) in November. The spike was primarily attributed to increased demand during marriage and festival season as well as easing of import curbs in November. Gold imports jumped 280 per cent to $4.17 billion in October.