New Delhi, December 30, 2024 – India’s Current Account Deficit (CAD) is expected to range between 1.1% to 1.2% of GDP in the fiscal year 2024-25. ICICI Bank projects a CAD of 1.1%, driven by a widening trade deficit and foreign portfolio investment (FPI) outflows. The Asian Development Bank (ADB) has slightly revised its forecast to 1.2% from 1.0%.
Key Factors Behind the Deficit
India’s CAD is influenced by a record high trade deficit of USD 37.8 billion in November 2024, primarily due to increased gold imports. Capital flows have also reversed, with USD 10.3 billion in outflows from equity and debt markets, compared to inflows of USD 20 billion in the previous quarter. The rupee has depreciated to a historic low against the dollar, exacerbating the situation.
Outlook and Implications
The fluctuation in CAD is expected to pressure the rupee, with predictions of it weakening to 86 by September 2025. To stabilize the current account, India may need to attract more foreign capital and reduce its trade deficit.
4o mini
