According to the India Ratings and Research (Ind-Ra) latest report, India’s Current Account Balance (CAB) is expected to increase 1% of its Gross Domestic Product (GDP)in the 2nd Quarter (Q2: July-September) of Financial Year 2024-25 (FY25).
- The report has estimated a deficit of nearly USD 8 billion, is equivalent to 0.8% of GDP in the Q1 of FY25, which is a reversal from the surplus of USD 5.7 billion (0.6% of GDP)in the previous quarter.
Key Findings:
i.As per the report, India’s merchandise exports grew by 6% Year-on-Year (Y-o-Y) in Q1 of FY25. This growth was mainly driven by a significantly low base effect, as Q1FY24 has seen a Y-o-Y decline of 14.1%, which was further boosted by other factors like, stable demand from major markets such as: the United States of America (USA), the United Arab Emirates (UAE), and the Netherlands.
- However, good exports fell from a seven-quarter high of USD 120.4 billion (registered in the previous quarter) to USD 110.1 billion.
ii.India’s merchandise imports in Q1FY25 increased by 7.6% Y-o-Y, to USD 172.2 billion. This increase was mainly attributed by a low base effect, with imports of primary and consumer non-durable goods increasing by 11.7% and 14.6% Y-o-Y respectively.
- According to the report, consumer durable and intermediate goods imports witnessed more modest growth of 3.5% and 4.3%, while infrastructure goods imports decreased by 0.5%.
iii.The report has outlined top 10 items which has contributed significantly to the Y-o-Y growth in India’s exports included petroleum products, telecom instruments, aircraft, spacecraft and parts, other commodities, drug formulations and biologicals, electric machinery and equipment, among others.
- The volume growth of these items varied from each other, ranging from a decrease of 25% to an increase of 217.1%, while value growth ranged from 8.8% to 326.2%.
iv.India’s trade deficit continues to remain high, increasing from USD 20.1(Q4FY24) billion to USD 21.8 billion(Q1FY25).
- Since 2022, India’s trade deficit with China has remained between USD 18.4 billion to USD 24.9 billion.
India’s Trade Outlook for Q2FY25:
i.Ind-Ra report has estimated that the services trade surplus to increase by 10.6% Y-o-Y to USD 44 billion in Q2FY25.
ii.It has further projected that India’s merchandise exports will see a increase of 1% on annual basis and expected to reach about USD 108 billion in Q2FY25, mainly driven by a favourable base effect.
iii.While, it has estimated India’s merchandise imports will increase by 3.5% Y-o-Y to nearly USD 176 billion in Q2FY25.
- Also, the goods trade deficit for India is estimated to increase to USD 68 billion in Q2FY25.
Global Trade Performance in Q1FY25:
i.As per the report, global trade in Q1FY25 saw a 14.1% Y-o-Y growth, the fastest pace of growth in six quarters.
ii.The global manufacturing Purchasing Managers’ Index (PMI) decreased to 49.7 in July 2024, indicating a contraction as production levels declined in developed economies.
iii.The report showed that despite the challenges faced by the goods sector, demand for services remains strong as the global services PMI stood at 53.3 in July 2024, maintaining its expansionary growth for 19 consecutive months.
- Also, India’s services PMI for August 2024 has increased to its 5-month high at 60.9, outperforming the manufacturing sector.
About India Ratings and Research (Ind-Ra):
Chairman, Managing Director (CMD) and Chief Executive Officer (CEO) – Rohit Karan Sawhney
Headquarters- Mumbai, Maharashtra
Established- 1995
