Moody's Investors Service has said that India's current account deficit (CAD) is likely to remain low on account of decline in oil prices, which has dropped by nearly 60% over the past one year to around $45-46 per barrel, easing pressure on India's huge oil import bill. Though, it also said that a slow recovery in industrial output and investment will drag economic growth to 7% in the current financial year. India's current account deficit (CAD), difference between the inflow and outflow of foreign exchange, has narrowed significantly from 4.8% in 2012 to 1.4% in 2014. It said that 'We expect this trend to continue, supported by lower oil import costs.'
Moody's has reduced its projection for India’s growth to 7% in 2015 and 7.5% in 2016 from 7.5% and 7.6%, based on high frequency indicators suggesting that the recovery in industrial output and investment is slow, and bank credit growth still subdued. In the first quarter of current financial year India's economy grew at 7% and government expects the economy to grow at 8-8.5% in the fiscal ending March 2016.
Moody’s further stated that the risk of a weaker monsoon and potential for higher food price inflation narrowed the scope for more significant monetary easing in the first half of the year. However, it said that “our expectation is that despite its slower than anticipated pace, the direction of recovery is positive, which is reflected in our 2016 forecast”. Besides, it has lowered growth forecasts for many Asia Pacific (APAC) sovereigns, citing that subdued global growth, exacerbated by weaker demand from China.