Falling exports and commodity prices will also help the country print in a moderate CAD at USD 24-26 billion in Q3FY23 from likely high of USD31-34 billion in Q2FY23, Icra Ratings said in a report.
Merchandise exports remained flat in November with an on-year growth of 0.6 per cent. This came in after the first steep contraction of 16.6 per cent in October-first since February 2021.
Imports also moderated in November to 5.4 per cent but declined by 1.4 percent month-on-month, aided marginally lower commodity prices.
Average trade deficit narrowed in October-November from Q2 FY23, auguring well for current account deficit for Q3, notes the report, but warned merchandise exports are expected to contract in December-March, owing to external slowdown and softer commodity prices.
This has the merchandise trade deficit narrowing to a seven-month low USD 23.9 billion in the month. The Q2 monthly average was USD 25.9 billion.
The current account deficit is expected to reach an all-time high of USD 108-112 billion or 3.3 per cent of GDP in FY23, the agency said even though it foresees a mild moderation in the deficit in H2 to 3.2 per cent from 3.4 per cent in H1, due to lower commodity prices and a seasonal uptrend in exports.
Going ahead, the agency expects merchandise exports to contract by 7 per cent in the December-March period of the current fiscal, owing to slowdown in key export destinations and softer commodity prices, even as pre-Christmas shipments are likely to aid exports in December.
Merchandise imports, on the other hand, are expected to rise by 4 per cent on-year during this period.
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