State Bank of India’s (SBI) research report Ecowrap has stated that India’s current account deficit is expected to widen to 2.5 percent of the Gross Domestic Product (GDP) in the financial year 2018-19, on the back of rise in the crude oil prices. It also said that CAD, difference between inflow and outflow of foreign exchange, is currently estimated at 1.9 percent for 2017-18.
According to the report, every $10 per barrel increase in the price of oil results in additional import bill of $8 billion. It pointed out that this will, in turn, decrease the GDP by 16bps, increase the fiscal deficit by 8bps, CAD by 27 bps and inflation by 30 bps and added that these are just model estimates and the actual figures could vary. Besides, it said that the exports (both services and merchandise) need further push to keep the external metrics stable. It indicated that the exports grew at 9.78 percent during 2017-18. It also highlighted that April 2018 exports recorded 5.17 percent growth, which shows that the outbound shipments from India have still not overcome the GST implementation issues.
SBI Ecowrap further said that crude price rise by $17 in the span of a year has been reflected in the imports, showing a growth of 19.59 percent. It also said that crude prices are expected to rise further during this year and the imports are likely to grow by at least 14 percent, which will worsen the trade deficit and have a negative impact on rupee value.