India's current account deficit may swing to surplus in Q1 2016: Nomura

NEW DELHI: India's current account deficit (CAD) is likely to swing to surplus in the January-March period of this year amid lower oil and gold imports, says a Nomura report.

The current account balance is expected to record a surplus of around $3 billion (0.6 per cent of GDP) in January-March period of 2016 from a deficit of $7.1 billion (1.3 per cent of GDP) in the October-December quarter of 2015.

"This is largely seasonal in nature, but is also helped by lower oil and gold imports," Nomura said in a research report, adding if this materialises, it would be the first quarterly surplus in nine years.

CAD narrowed to 1.4 per cent in April-December, from 1.7 per cent in the corresponding period of 2014-15.

Current Account Deficit, the difference between inflow and outflow of foreign exchange, came in at 1.3 per cent in 2014-15, 1.7 per cent in 2013-14 and a record high of 4.8 per cent of GDP in 2012-13.

In the October-December quarter, forex reserves increased by $4.1 billion mainly because of higher FDI flows under the capital account.

From 2007 to 2015, the current account improved by 1.5 per cent of GDP on average, between January-March and October-December every year.

In 2016, despite weak merchandise exports and a lower services trade surplus, lower oil imports and a sharp moderation in March gold imports (due to jewellers' strike) helped improve the current account, it said.

"Overall, India should record a large basic balance of payments (current account and net FDI) surplus of around $16 billion (0.8 per cent of GDP) in 2015-16, its largest in a decade," Nomura added.