India’s current account deficit (CAD) deteriorated sharply in Q3 FY22 in line with expectations, clocking the second highest level on record at USD 23.0 bn vs. USD 9.9 bn in Q2. Led primarily by widening of the trade deficit, CAD/GDP ratio rose to 2.7% - the highest level in last 6 quarters. The bigger surprise was however on the overall balance of payments outcome. Despite waning of total net capital flows in the third quarter and foreign investment flows registering a marginal outflow, the overall balance of payments managed to post a miniscule surplus of USD 0.5 bn, contrary to our expectations of a single-digit deficit. Going forward, we expect the current account deficit to widen in FY23, to close to USD 85 bn. As such, the overall Balance of Payments is anticipated at a deficit of USD 10 bn.
To get a detailed perspective and outlook, download our report.