Current Account Deficit May Hit 3-Year High In 2021-22: Report

The country’s current account deficit is likely to reach a three-year high of 1.8 percent in 2021-22

Mumbai:

A report on Thursday said the country’s current account deficit (CAD) is likely to reach a three-year high of 1.8 per cent or $43.81 billion in 2021-22, as against 0.9 per cent or $23.91 billion in 2020-21. There was surplus.

According to an assessment by India Ratings, the CAD has grown to $17.3 billion or 1.96 per cent of GDP in the fourth quarter of 2021-22, compared to $8.2 billion or 1.03 per cent in the year-ago period, and $23.02 billion or larger. The scale was down. 2.74 per cent in the third quarter, which was a 13-quarter high.

The improvement in key numbers is on account of a significant improvement in merchandise exports in 2021-22, when it grew by 42.4 per cent as against a negative 7.5 per cent in the pandemic-hit 2020-21.

But exports could face significant headwinds from rising uncertainty and volatility in the global economy, primarily due to rising commodity prices, especially after Russia’s invasion of Ukraine of crude, the report warned. , and pointed to a lower forecast of global growth by the WTO. (WTO) which sees the global economy to shrink by around 3 per cent in 2022, down from the earlier 4.7 per cent forecast.

The world trade body has projected import growth for India’s major exporting partners such as North America and Europe at 3.9 per cent and 3.7 per cent respectively in 2022, down from 4.5 per cent and 6.8 per cent respectively as earlier forecast.

However, higher oil prices will benefit oil exporting countries such as Saudi Arabia, leading to higher real incomes, and thus, higher import demand which is expected to grow by 11.7 percent in 2022 from the earlier forecast of 8.7 percent.

On the other hand, India’s merchandise imports are expected to pick up in 2022-23 due to increased commodity prices and depreciation of the rupee.

The agency expects exports of goods in the first quarter of 2022-23 to be $112.5 billion, an increase of 85.7 percent over the same quarter of the previous fiscal.

Merchandise imports grew by 44.1 percent to $120.9 billion during April-May 2022 and are expected to be $182.9 billion.

Further, the rupee is expected to average 77.1 against the US dollar in the first quarter, down 4.5 per cent in the first quarter of 2021-22.

Merchandise exports grew by 29.2 per cent to a record $116.8 billion in Q4 of 2021-22, up 20.4 per cent, despite the higher base effect of Q4 of 2020-21.

Import volumes from top exporting partners such as the US and Europe grew 9.7 per cent and 8.3 per cent, respectively, in the fourth quarter. As a result, total exports exceeded the target of $400 billion, a lifetime high of $421.8 billion in 2021-22, an increase of 42.4 percent from $296.3 billion in 2020-21, While the negative is 7.5 percent. In 2020-21.

2022-23 has been encouraging so far as exports grew by 22.9 per cent in April-May. But if Ukraine’s war continues, which could lead to stalemates in the developed world and continued supply chain disruptions, exports could be hit, the report warned.

Major commodities such as petroleum products, iron and steel, aluminum and its products, pearls, precious and semi-precious stones, sugar, motor vehicles and cotton yarn contributed about 72.2 per cent to the export growth, in the range of 14-158 per cent. is growing. Percentage in terms of value in the fourth quarter.

Gold imports fell 54 per cent in the fourth quarter after seven quarters as demand fell to the same level in the quarter due to the start of the third wave of the pandemic.

Source

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