India is likely to post its first current account surplus in nine years in the latest quarter, which should bolster the rupee though it is not a good sign for the economy as it reflects weak investment demand at home and subdued exports, analysts said.
Forecasts given by investment houses’ research notes and from analysts that Reuters spoke to showed expectations centering on a surplus of $4 billion, or 0.8 per cent of GDP, in April-June quarter.
That compared with a deficit of $6.2 billion, equivalent to 1.2 per cent of GDP, in the same quarter a year ago. And, if the forecasts prove correct it will be the first surplus since January-March 2007, though India is unlikely to keep the surpluses coming.
For the full year ending in March 2017, India is likely to post a deficit even lower than last year’s 1.1 per cent of GDP, as foreign investment inflows remain steady – and that should be broadly supportive for the rupee.