India's current account gap is likely to widen modestly to (-) 1.6 per cent of GDP in the current financial year from (-) 1.3 per cent last year, a DBS report says.
“Factoring in weak exports that partly offsets the benefit from a lower commodity import bill and moderating services trade surplus, we expect the current account gap to widen modestly to
(-) 1.6 per cent of GDP in FY 15-16 from
(-) 1.3 per cent last year” DBS said in a research note. For the first quarter ended June 30, CAD narrowed to 1.2 per cent of GDP at $6.2 billion following contraction in trade deficit and higher earnings from services exports. The global brokerage firm further said the basic balance of payments has also narrowed notably and added that “worries over India's external balances are on a flash-point for the time being.”
According to the global financial services major, the gold schemes launched by the Government would help to contain current account gap. The global brokerage said the demand for gold moderated sharply since last year due to administrative controls and instead of physical assets (like gold), savings are likely to be channelled back towards the financial assets.