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India's current account balance to swing into surplus of $30 billion in FY21: ICRA
Sep-23-2020

Rating agency ICRA in its latest report has said that India's current account balance will swing into a sizable, albeit temporary, surplus of $30 billion or 1.2 percent of Gross Domestic Product (GDP) in FY21, due to slowdown in imports during the pandemic. It also said the crucial number, which is one of the key aspects gauged while determining a country's macroeconomic position, will swing back to a deficit of $15 billion in the next financial year. It added that the deficit stood at $24.6 billion or 0.9 percent of GDP in FY20.

With the domestic and global lockdowns to fight COVID-19 exuding a differentiated impact on exports, imports and remittances, the report expects India to display a sharp current account surplus of $24 billion in H1 FY2021 (April-September). It also said a lagged pickup in domestic non-oil imports, as well as the potential fresh restrictions that may be warranted in some major trading partners to ward off rising COVID-19 infections, are likely to restrict India's current account surplus to $6 billion in the second half of the fiscal year. 

As per to the report, merchandise exports contracted by 36.7 percent to $51.3 billion in Q1 FY21 from $81.1 billion in Q1 FY20, but merchandise imports recorded a much sharper 52.4 percent decline to $60.4 billion in the same period as against $127 billion a year ago on severely constrained demand conditions. It noted that this compressed the merchandise trade deficit to $9.1 billion in the quarter, down from $46.0 billion in the year-ago period. It added that despite a contraction in services exports and imports, the services trade surplus rose to $21 billion in Q1 FY21 from $19.6 billion in Q1 FY20.

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