High trade deficit poses challenges for CAD in 2022-23: Economists

With India’s trade deficit widening to an all-time high of USD 31 billion in July 2022, economist have become apprehensive about the country’s ability to fund its current account deficit (CAD), reported Economic Times. Barclays expects India’s trade deficit to remain above USD 20 billion for an extended period. According to the firm’s chief India economist Rahul Bajoria, widening of trade deficit poses risk to their forecast for the current account deficit to widen from present USD 115 billion for 2022-23. QuantEco Research has revised their CAD projections for 2022-23 upwards to USD 130 billion from USD 105 billion. It has also revised its balance of projections (BoP) estimate to USD 60 billion from USD 35 billion. Economists also opine that India’s deteriorating external balances will likely keep the Rupee under pressure. QuantEco’s economist Vivek Kumar fears that the recent recovery in the rupee from Rs.80 per US dollar is temporary. He expects the local unit to fall to Rs.81 to the US dollar in the current fiscal year.

References
1. https://www.business-standard.com/article/economy-policy/india-s-trade-deficit-likely-to-remain-above-20-billion-barclays-122080300333_1.html
2. https://economictimes.indiatimes.com/news/economy/indicators/indias-external-balance-challenges-rupee-woes-worsened-by-record-high-trade-deficit/articleshow/93319435.cms