Amid the ongoing economic slowdown, the Bank of Baroda on Thursday estimated that India’s current account deficit (CAD) will inch up to 3.5 per cent of gross domestic product (GDP) in financial year (FY) 2023, from 1.2 per cent in FY22.
India’s trade deficit in FYTD23 has surged to USD 175 billion as of October 2022 compared with USD 94 billion in FYTD22, driven by a faster pace of import growth.
It is even higher than USD 100.7 billion during FYTD20, as imports have rebounded more strongly than exports. Imports also increase as GDP goes up.
According to the report, imports are higher at USD 437 billion in FYTD23 versus USD 328 billion last year.
At the same time, exports have risen at a slower pace and have reached USD 262 billion in FYTD23 so far compared with USD 234 billion last year.
“Our analysis shows that the negative impact of slowing global growth will outweigh the positive impact through a depreciating currency,” it added.
Also, the exports of pharma and gems and jewellery also rose, albeit more moderately. Together these products contribute to 51 per cent of total exports.
On the other hand, exports of textiles and engineering goods, contributing to 31 per cent of total exports, have fallen in FYTD23 so far to USD 19.7 billion and USD 62.5 billion respectively.
Improvement in exports has also contributed to the pick up in credit growth of industries, which has risen by 12.6 per cent in FYTD22 (April to September 2022) compared with a 1.7 per cent increase in FYTD22.
Within this, credit to the petroleum industry has gone up by 76 per cent (20 per cent last year) and credit to the chemical sector has gone up by 23 per cent.
“Credit to textiles (4.9 per cent versus 7.3 per cent) and gems and jewellery (5.4 per cent versus 14 per cent) has weakened compared with last year,” the report said.
On the contrary, despite a decline in engineering exports (-2.3 per cent from April to October 2022 versus a 60 per cent increase from April to October 2021), credit to the sector has increased (14 per cent versus 3 per cent), it added.
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