India's current account deficit likely to be 1.3% of GDP in 2017: Nomura

According to Japanese financial services major Nomura, as the cash crunch eases from April-June quarter of this year the country's import growth is expected to rebound faster than the export growth. Representational Image. Image Source: ZeeBiz WebDesk

India's current account deficit (CAD) is expected to be around 1.3% of GDP in 2017 as against a deficit of 0.8% in 2016, says a report.

According to Japanese financial services major Nomura, as the cash crunch eases from April-June quarter of this year the country's import growth is expected to rebound faster than the export growth.

The improvement in exports along with the moderation in gold imports narrowed the trade deficit to $10.4 billion (nearly Rs 69,188.6 crore) in December from a 16-month high of $13 billion (nearly Rs 86,485.8 crore) in November.

According to official figures gold imports during December declined by 48.49% to $1.96 billion (nearly Rs 13,039.4 crore).

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"The trade data suggest that exports managed to recover in December despite the cash crunch induced by demonetisation, but weak core import volumes suggest that domestic demand has been hit," Nomura said in a research note.

"We remain cautious on the export outlook for the next few months as the cash crunch could take a toll on exports despite improving global demand," Nomura said, adding that core import growth is also expected to remain subdued as well due to demonetisation.

It further said that "given the larger trade deficit in November, we expect the current account deficit (CAD) to widen to 2.5% of gross domestic product (GDP) in the fourth quarter (Q4) of 2016 versus a deficit of 0.6% in the third quarter (Q3) of 2016".

Nomura expects current account deficit (CAD) to widen to 1.3% of GDP in 2017 versus a deficit of 0.8% in 2016.

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