India's current account deficit in Q2FY22 seen at 1.3% of GDP: Ind-Ra

New Delhi, Dec 13 (IANS) Cost pressure, led by rise in commodity prices, is expected to take India's current account deficit during Q2FY22 to 1.3 per cent of the GDP, India Ratings and Research said on Monday.

However, a relatively stable services trade surplus is expected to cushion the deficit.

"A stable services trade surplus of $24 billion would help rein in the current account deficit at $10.1 billion in 2QFY22. The current account was in surplus of $6.5 billion in Q1FY22," the rating agency said.

Besides, India Ratings expects India's merchandise import volumes to recover further with the economic activities picking up with a decline in Covid-19 caseload, improved vaccination rates, and the festive season demand.

Accordingly, India's merchandise import bill is estimated to be around $150 billion in Q3FY22.

"However, the surge in Covid-19 cases in key export destinations such as the EU and the US may keep the merchandise exports at around $95 billion in Q3FY22. Therefore, the merchandise trade deficit is expected to come in at $55 billion in Q3FY22," the agency said.

It said that spread of the newly-found Omicron variant may play a spoilsport causing an economic disruption.

Taking Omicron into consideration, it pegs India's exports in FY22 closer to the Centre's target of $400 billion.

"To achieve the export target of $400 billion in FY22, exports will have to grow 18.5 per cent YoY in the remaining five months of this fiscal. Given the trend so far in this fiscal, Ind-Ratings believes it is achievable," it added.