Gold Imports To Dictate Size Of Current Account Deficit in H2 of FY2017: ICRA

  • 06-Dec-2016
  • Gold Imports To Dictate Size Of Current Account Deficit in H2 of FY2017: ICRA

KOLKATA: ICRABSE -0.56 % expects India's current account deficit to be curtailed under US$20 billion in FY2017, lower than the~US$22 billion in FY2016. With the gold import bill in October-November 2016 estimated to be nearly as high as the previous six months, the current account deficit in H2 FY2017 would significantly exceed the level for H1 FY2017. Moreover, the demand for gold in the remainder of this year would influence the size of the deficit in H2 FY2017. 

Aditi Nayar, Principal Economist, ICRA Limited, said: "If the recent amendments to the Income Tax Act dispel demand for holding of gold as well as jewellery, the gold import volumes may decline significantly in the coming months. Assuming that the volume of gold imports during December 2016-March 2017 reverts to the average of around 45 tonnes per month seen in April-November 2016, India’s current account deficit would be curtailed at around US$15 billion in FY2017." 

"However, if the volume of gold imports in the last four months of FY2017 is elevated at an average of 70 tonnes per month, driven by continued wedding demand, India's current account deficit could be as high as nearly US$20 billion in FY2017," she added. 

The combined imports of gold, silver and precious and semi precious stones declined to US$26.4 billion in April-October 2016 from US$33.2 billion in April-October 2015. In contrast, exports of gems and jewellery rose to US$26.4 billion in April-October 2016 (in line with the imports in that period) from US$23.1 billion in April-October 2015. This suggests that either domestic stocks were drawn down extensively, or some imports were procured through unofficial channels. Anecdotal evidence suggest .. 

Growth in the volume of crude oil imports would be muted in Q3 FY2017, following a temporary lull in trade-related activity post-demonetisation, as well as a step-down in irrigation-related demand for diesel given healthy reservoir levels. However, following the agreement of the Organization of the Petroleum Exporting Countries (OPEC), on November 30, 2016, to cut total crude oil production of its member countries by 1.2 million barrels per day from January 2017, crude oil prices are likely to b .. 

India's current account deficit shrank to a marginal US$0.3 billion in Q1 FY2017 from US$6.1 billion in Q1 FY2016. With the narrowing of the merchandise trade deficit in Q2 FY2017 substantially larger than the fall in the services surplus, ICRA expects the current account deficit for the just-concluded quarter to print at US$2.5-3.5 billion, less than half of the US$8.5 billion recorded in Q2 FY2016. As a result, the current account deficit in H1 FY2017 was likely subdued at under US$ 4 billion. .. 

Source: Dailyshippingtimes.com

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