Breaking clear of its fragile status, India’s current account is poised to swing into surplus for the first time in a decade as the sharp decline in commodity prices drives a significant improvement in the country’s terms of trade.
India will post a current account surplus of 0.3 percent of gross domestic product (GDP) in 2015, forecasts Morgan Stanley, following an estimated 1.6 percent deficit in 2014.
The bank cites the collapse in the price of oil – India’s largest commodity import – and lower gold imports as the two main factors helping the current account balance.
“Oil imports reflect the largest saving in the overall current account balance,” Morgan Stanley said. The price of crude oil – which accounted for 34.5 percent of total imports in 2014 –has declined by 59 percent in rupee terms since June 2014.
Gold imports are also set to fall as inflation expectations fall and real deposit rates remain decidedly positive, the bank said. The yellow metal accounted for 7.7 percent of imports last year.