New Delhi: India's current account deficit is expected to stay comfortable at USD 10.1 billion in this financial year, largely on account of likely demand moderation post the demonetisation move, says a Citigroup report.
According to the global financial services major, the country's current account could likely widen in fiscal year 2017-18 to USD 30 billion or 1.2 percent of GDP.
"Incorporating the October data and with likely demand moderation post the demonetisation move, we expect current account deficit to stay comfortable at USD 10.1 billion in FY17 or 0.5 percent of GDP," Citigroup said in a research note.
As per the report, the current account could likely widen in financial year 2018 as average crude prices are expected to rise, along with the gold demand in the next fiscal year.
Moreover, higher exports growth and non-oil, non gold imports are likely to widen the country's current account situation as well.
India's merchandise trade deficit widened to USD 10.2 billion in October from USD 8.3 billion last month, almost entirely due to an increase in monthly gold imports.
Gold imports rose to USD 3.5 billion from USD 1.8 billion last month as jewellery demand increased in the festive season.
"The last two months of trade data reinforces our view that after two years of steady decline, exports and imports growth have begun to normalize as commodity prices stabilise," Citigroup said.
Citigroup expects capital flows at USD 39 billion in financial year 2017 taking BoP surplus to USD 29 billion (earlier estimate USD 24 billion). The BoP surplus is likely to improve further in financial year 2018 to USD 39 billion as NRI deposits swing to positive.
On rupee, it noted that "we believe RBI should be able to smooth any sharp currency moves and stabilize USD Rs in the 66 to 68 range".