In what could be an extremely encouraging development for the economy, global brokerage firm, HSBC, underscored that India’s current account deficit will bounce back in surplus after a span of 32 quarters of deficit, for January-March quarter. Further, it expects the deficit to halve to 0.60% of GDP in 2015-16 and remain at manageable levels the year after, on account of receding oil prices, which makes import cheaper.
Crude prices slipped to multi years low between June 2014 and January 2015, reflecting higher-than-expected oil and shale gas production in the US and lower demand in emerging markets coupled with OPEC's refusal to lower output. In the December quarter alone crude prices have fallen around 60%, further positive for the economy.
In other positive for the economy, HSBC pared its oil price expectation to just over $60/barrel for end-2015, further rising it to $68/barrel by the end of 2016, highlighting that a benign impact across India's macro economy, ranging from an improved growth outlook and lower inflation, to healthier fiscal accounts.
In a bit of concern, HSBC has lowered its GDP’s projection at 5.3% in FY15 as against 5.5% earlier, and further pared it to 6.3% in FY16 from 6.5% and 6.8% in FY17 against 7.1%.