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Ecoscope: CAD at four-year high in 1QFY18

15-Sep-2017

India's current account deficit (CAD) widened sharply to USD14.3b (or 2.4 % of GDP) in 1QFY18, higher than our estimate of USD13.1b, but below market consensus of USD15.4b. Deterioration in CAD was led by a sharp rise in gold and non-oil non-gold imports.
Financial inflows increased sharply to USD25.4b in 1QFY18 on account of a surge in foreign portfolio investment (FPI)inflows (USD12.5b) and a doubling of FDI inflows (USD7.2b).
The surge in financial inflows more than offset the increase in CAD, leading to a USD11.4b accretion to forex reserves in1QFY18. This was the highest addition to forex reserves in two years.
Total domestic savings (implied from the difference between investments and CAD) declined to 30.1 % of GDP in 1QFY18from 32.5 % in 1QFY17.Although we expect CAD to widen to 1.2 % of GDP in FY18 from 0.7 % in FY17, it will continue to remain at comfortable levels.

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