CAD to come down to 1.2% of GDP in FY15: SBI report

India’s current account deficit is expected to come down to $25 billion, or 1.2 per cent of GDP, in the current financial year, says a report.

CAD in the last fiscal stood at $32.4 billion, or 1.7 per cent of the GDP, while it hit a record high of $88 billion, or 4.7 per cent of the GDP, in 2012—13.

According to a research report by SBI, the current account deficit is likely to fall in FY 2015 but could widen next fiscal on the back of pick up in the Indian economy.

“We expect, FY15 CAD to narrow down further to below $25 billion (1.2 per cent of GDP). FY16 may see the CAD widening close to 2 per cent of GDP, with the economy picking up,” the SBI’s economic research department said.

The current account deficit (CAD) narrowed to $8.2 billion (1.6 per cent of GDP) in Q3 FY15 from $10.1 billion (2.0 per cent of GDP) in Q2.

CAD has narrowed to 1.7 per cent of the GDP for the first nine months of the current fiscal, driven down by lower oil prices and higher services exports that offset the dip in merchandise shipments.

“The softening of the CAD in Q3 FY15 was primarily on account of net exports of services which picked up on the back of an improvement in net earnings through travel and software services, and lower net outflows under primary income (profit, dividend and interest),” the report added.

As per the report, net portfolio capital inflows in FY15 have crossed $44 billion (by 11 March, 2015) and net direct investment reached $30.3 billion in the first 10 months of FY15. Moreover, net FII and FDI inflow have crossed $73 billion in FY15, highest inflow ever since FY91.