India: Q1 current account deficit narrows slightly – Nomura

India’s current account deficit narrowed marginally to 1.9% of GDP (USD13.1bn) in Q1 2018, from 2.1% (USD13.7bn) in Q4, slightly above consensus expectations (Consensus: -USD12.4bn, Nomura: -USD16bn), notes the research team at Nomura.

Key Quotes

“The merchandise trade deficit moderated, partly due to seasonal factors, while invisible receipts eased on lower software services exports and increased investment income outflows. Net capital flows rose sharply to USD25bn in Q1, from USD22.5bn in Q4, led mainly by higher net FDI inflows (USD6.4bn in Q1 vs. USD4.3bn in Q4) and “other capital” inflows, while net portfolio investment flows moderated (USD2.3bn vs. USD5.3bn).”

“Overall, the balance of payments recorded a surplus of USD13.2bn, vs. USD9.4bn in Q4. Despite the higher net FDI inflows, the basic balance of payments (current account + net FDI) remained negative.”

“Looking ahead, we expect the current account deficit to widen to 2.7% of GDP in FY19, from 1.9% in FY18, as the merchandise trade deficit will likely widen on the back of increasing oil prices and elevated core (non-oil, gold) imports growth.”