ICICI Securities Predicts Rising Trade Deficit Amidst High Oil Prices and Gold Imports
Rising oil prices, gold imports to widen trade deficit, CAD may touch 1.5-2% of GDP: ICICI Securities
The Economic Times
Image: The Economic Times
ICICI Securities forecasts that India's current account deficit (CAD) may reach 1.5-2% of GDP due to rising oil prices averaging around $100 per barrel and a significant increase in gold imports. Despite strong service exports, the widening trade deficit, driven by a surge in non-essential imports, raises concerns about the country's external balance.
- 01India's goods exports rose 14% YoY to $43.6 billion in April, with oil exports hitting $9.6 billion, a 35% YoY increase.
- 02Gold imports surged 82% YoY to $5.6 billion, contributing significantly to the trade deficit.
- 03The overall goods trade deficit reached $28.4 billion in April, up from $20.7 billion in March.
- 04Net services exports grew 29% YoY to $20.6 billion, providing some cushion against the widening deficit.
- 05ICICI Securities highlights the need for policy measures to restrict non-essential imports to safeguard the external balance.
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ICICI Securities has projected that India's current account deficit (CAD) could escalate to 1.5-2% of GDP this year, primarily due to rising global oil prices, which are expected to average around $100 per barrel, and a substantial increase in gold imports. In April, India's goods exports experienced a robust 14% year-on-year growth, reaching $43.6 billion, driven by a 35% increase in oil exports to $9.6 billion. However, the surge in gold imports, which rose by 82% YoY to $5.6 billion, is a significant contributor to the widening trade deficit. The total goods trade deficit widened to $28.4 billion in April, up from $20.7 billion in March, while net services exports provided some relief, growing 29% YoY to $20.6 billion. The report emphasizes the importance of policy measures to limit non-essential imports to maintain external balance amid ongoing global uncertainties.
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The rising trade deficit may lead to increased pressure on the Indian rupee and could affect the prices of goods and services for consumers.
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