FY23 CAD maybe 10 yr high, export growth can be sustained: SBI Research

SBI Research on Friday said that India’s current account deficit in the current fiscal may reach a decade high even as the country’s export growth could be sustained.

India recorded a CAD of 1.2% of GDP in April-December 2021.

“FY23 will be a challenging year since as per our estimates, CAD will breach the 2.5% mark and may reach to a decade’s high,” it said in a report.

As per the report, 55% of the increase in exports in FY22 is attributed to quantity effect and the rest 45% is the price effect, indicating that the growth in exports in FY22 could be sustained if “we continue to follow right policies”.

India’s goods and services exports in FY22 were a record $670 billion.

“Only 31% of the increase in exports of petroleum crude and products in FY22 can be attributed to higher quantity and rest 69% is because of higher price,” SBI Research said.

It said that imports in FY22 from China “increased significantly, reflecting the pandemic induced uncertainties” but the share of imports from China declined.

It occupies a share of 5.2% of exports and third in terms of ranking of countries.

While India’s service exports of telecommunications, computer, and information services “far outpace” China, Beijing is rapidly catching up and India needs to buckle up in these areas, SBI Research cautioned.

It also said that the large gap in minimum support price and global prices is likely to incentivise export of wheat from India.

“This needs to be judiciously balanced with domestic supply of wheat,” it said.

On exports being driven by manufacturing or services, SBI Research said that both have to be viewed as complementary and not as exclusive activities.

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