India's current account deficit to narrow to -USD24b

Thanks to improved merchandise trade balance.

According to DBS, the current account balance numbers will be on the tap on Fri, 28 Jun. After reaching a record high deficit at –USD32.6bn (6.7% of GDP) in the Oct-Dec12 quarter, the current account shortfall ( CAD) is poised to narrow to –USD 24bn, which translates into 4.7% of GDP in Jan-Mar13 (4Q FY12/13).

Here's more:

This will leave the FY12/13 CAD at record above 5.0% of GDP in the last fiscal year, before pulling back slightly to 4.5% this year, according to our estimates.

The improvement in the merchandise trade balance in the quarter coupled with sustained strength in the service earnings is likely to have helped the current account balance.

The rupee was also relatively stable in the period allowing the central bank to turn net buyers of dollars, after selling cumulative USD 10.7bn in the twelve months prior.

The positive flows outlook islikely to reflect well on the balance of payments position during JanMar13, before coming under pressure Jun13 onwards.