India seen to continue enjoying favorable BoP dynamics

2017 BoP surplus may reach US$20B from US$9.1B previously.

Standard Chartered (SC) narrows its current account (C/A) deficit forecast for FY17 (ending March 2017) to 0.9% of GDP from 1.5% and raise our balance-of-payments (BoP) surplus forecast to USD 20.0bn from USD 9.1bn previously.

These revisions are driven by (1) stronger-than-expected Q1-FY17 BoP data, (2) subdued commodity prices, and (3) an increased likelihood of higher portfolio investment on improved risk appetite in the remainder of FY17.

"India’s external-sector dynamics remain favourable, as demonstrated by the Q1‑FY17 BoP data release. The C/A balance remained close to the 2007 low at -USD 0.3bn, though it remained in a marginal deficit, versus broad-based expectations of a small surplus," SC said in a report.

SC added that robust capital flows drove the BoP surplus to USD 7.0bn in Q1-FY17, more than double the USD 3.3bn in Q4-FY16.

"We believe narrowing C/A deficits and stronger capital flows will result in another year of a double-digit BoP surplus, despite the heavy foreign-currency non-resident (FCNR) redemptions lined up for September-December 2016," it explained.