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Indias balance of payments (BoP) is expected to post a surplus of USD 60-65 billion in FY27 despite a widening current account deficit, as strong inflows through special RBI schemes are likely to offset weak capital flows, HDFC Bank said in a report.
The bank expects the current account deficit (CAD) to widen to around 1.1-1.3 per cent of GDP in FY27, with the deficit in the second quarter projected at 1.5-1.7 per cent of GDP. However, it has maintained an upside bias to its BoP surplus forecast. The large inflows mobilised under the RBIs FCNR(B) deposit and overseas borrowing measures are likely to more than compensate for the weak capital flows recorded in Q1 and support an overall BoP surplus in FY27, HDFC Bank said in its report. According to recent data released by RBI, as of August 31, total foreign exchange inflows under the RBIs special USD-INR swap facility stood at USD 136.38 billion, including USD 127.23 billion through FCNR(B) deposits, USD 5.26 billion under overseas foreign currency borrowings (OFCBs) and USD 3.89 billion through external commercial borrowings (ECBs). Indias BoP recorded a deficit of USD 8.1 billion in the first quarter, compared with a surplus of USD 4.5 billion a year earlier. The capital account moved into a deficit of USD 5.5 billion, while foreign portfolio investors remained net sellers with outflows of USD 9.6 billion. The current account deficit, however, remained contained at USD 4.2 billion, or 0.5 per cent of GDP, compared with USD 3.4 billion, or 0.4 per cent, in Q1 FY26. HDFC Bank said the merchandise trade deficit widened to USD 86.1 billion from USD 68.9 billion a year earlier, with merchandise imports rising 20 per cent to USD 218 billion. Higher crude oil and precious metal prices contributed significantly to the increase in the import bill. This was partly offset by stronger services receipts and remittances. Net services receipts rose 7.8 per cent year-on-year to USD 52 billion, while net transfer receipts, largely comprising remittances from Indians overseas, increased by USD 10 billion to USD 41 billion. The bank expects the elevated merchandise deficit to continue in coming quarters, while higher services exports should provide some support. It has assumed an average crude oil price of USD 85 per barrel for FY27 and cautioned that a prolonged period of elevated crude prices could push the CAD higher. For the rupee, HDFC Bank expects mild depreciation over the coming months, with the USD/INR pair seen in the 95-97 range by December-end. The bank said elevated global yields, amid a shift towards rate hikes by developed-market central banks, along with uncertainty over the West Asia conflict and its impact on oil prices, could weigh on the rupee. (ANI)
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