FY15 trade deficit likely at $153b; CAD at $46.7b: Citigroup

Tags: Economy
India's current account deficit is likely to widen to $46.7 billion in this fiscal year on account of recovery in domestic market and possible relaxation in gold restrictions post elections, says a Citigroup report.

The current account deficit (CAD) is the difference between outflow and inflow of foreign exchange.

According to the global financial services major, India's trade deficit for the current fiscal year is likely to increase to $153 billion, resulting in the widening of CAD level.

The country's trade deficit in the last fiscal (FY2014) declined to $138.6 billion from $190.3 billion in FY13.

"After a sharp compression in FY14 CAD, we expect marginal widening of CAD in FY15 to $46.7 billion or 2.3 per cent of GDP on account of domestic recovery and possible relaxation in gold restrictions post elections," the report said.

As regards the rupee, Citigroup said a positive election outcome could cause INR to appreciate, yet the domestic currency is not likely to sustain below the 60 levels for long and is likely to trade in the Rs 60-64 range in FY15.

"A positive election outcome could cause INR to gap down, yet we do not expect the INR to sustain below 60 levels for long as RBI would take the opportunity to shore up reserves. Overall we expect the unit to trade in the Rs 60-64 range in FY15," the report said.

The current account deficit had touched an all-time high of 4.8 per cent in FY13 - leading to a massive depreciation of the rupee.

According to official figures, India missed its export target in the last financial year even as the trade deficit for 2013-14 shrank to a three-year low of $138.59 billion.

In March, exports declined 3.15 per cent to post a drop for the second month in a row, while the trade deficit at $10.5 billion was the highest in five months, as per data from the Ministry of Commerce and Industry.

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