Due to rising international commodity prices and the worst resources outflows since the 2008 global financial crisis,. India’s current account deficit likely increased to its widest in nearly a decade in the April-June quarter.
Concerns over the severity of the current account imbalance for Asia’s third largest economy,. which have been nibbling at investor confidence for the months,. And are certain to deepen now that the Indian rupee is close to a record low to roughly Rs 80 to the US dollar,. and presently trade gap is widening.
India’s Trade Deficit
According to the Analyst Forecast, India’s Deficit on its Current Account, for the most recent quarter was $30.5 billion, or 3.6% of GDP, make public in September by 18 economists.
Forecasts varied from $28.5 to $34.0 billion, or 2.4% to 5% of GDP. The deficit for the January-March quarter was less than half that amount at $13.4 billion, or roughly 1.5% of GDP.
QuantEco Research Economist Vivek Kumar says, “The last quarter had a close to decade-high current account deficit while the trade deficit nearly reached new highs every month and the rupee depreciated to new record lows each week.”
“The currency is already under pressure to cover India’s Deficit on its Current Account. Given that most central banks around the world are tightening their monetary policies and the RBI’s currency holdings are decreasing, those pressures are likely to worsen.”
The rupee has lost about 7% of its value versus the US dollar since January 2022,. But during the 2013 “taper tantrum” crisis, when the US Federal Reserve abruptly stopped buying government bonds, it had lost about 20% of its value.
Even though India cuts the import duty on gold in september in response to a rising trade deficit. The increase in opportunity cost of holding distressed precious metals while strengthening the currency is rising But US interest rates have a significant impact on gold’s price.
The current account shortfall is predicted to linger close to a decade high till the end of this fiscal year. The Indian rupee is predicted to trade around its lifetime lows versus the dollar into next year and crude oil prices are predicted to stay high. – SHREE METAL PRICES