India’s FY Q1 CAD may at 4% on Gold import surge: DBS

The world’s biggest bullion consumer India’s current account deficit (CAD) may have widened to 4% of GDP in the first quarter due to a surge in gold imports and a deteriorated trade gap, said DBS Bank, Asia’s leading financial services group.”Our estimates for a shortfall in the current account of about USD 23 billion, are close to 4 percent of the gross domestic product. The reasons for the same are two–a sharp jump in gold imports and deterioration in the trade balance,” said the Singapore based bank.
The RBI will release the June quarter current account deficit Monday. Government aims to contain current account 3.7 percent of GDP for the entire fiscal. According to DBS, India’s financing ability was eroded due to significant outflow from the equity and debt markets since late-May caused by the fear of rollback of monthly asset purchases by the US Federal Reserve.
“The FII equity inflows maintained strength in April-May before witnessing modest outflows in June. The debt counterpart, however, fared poorly as the scale of June 13 outflows reversed the inflows seen in the prior eight months,” the report said.

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