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India to have current account surplus this quarter: HSBC

India’s current account is likely to swing to surplus after 32 quarters of deficit in the January-March period, and will halve to 0.6 percent of GDP in the next financial year starting April 1, says HSBC.

According to the global brokerage firm, of all the macro variables benefiting from lower oil prices, the current account balance is likely to gain the most.

“We are expecting to see a current account surplus in the January to March quarter after 32 consecutive quarters of deficit,” HSBC economists Pranjul Bhandari and Prithviraj Srinivas said in a research note.

The deficit is likely to halve to 0.6 percent of GDP in 2015-16 and remain at manageable levels the year after as the oil import bill is drastically reduced, they said.

Crude prices have more than halved between June 2014 and January 2015, reflecting higher-than-expected oil and shale gas production in the US and lower demand in emerging markets coupled with OPEC’s refusal to lower output.

In the December quarter alone crude prices have fallen around 60 per cent.

As India’s growth is largely driven by domestic sources with oil as key input, declines in oil prices are usually a net positive. But, considering the delay in capex cycle recovery, HSBC has lowered its GDP growth projection.

“We now see GDP growth at 5.3 per cent in FY15 (5.5 per cent earlier), 6.3 per cent in FY16 (6.5 per cent earlier) and 6.8 per cent in FY17 (7.1 per cent earlier),” it said.

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