MUMBAI (Reuters) – Barclays (LON:BARC) said that India’s trade deficit is likely to stay above $20 billion for a long time. This could lead to a bigger current account deficit.
Rahul Bajoria, chief India economist at Barclays, said in a note that while they still expect the trade deficit to reach US$265 billion, the odds are more likely that it will be even bigger. This means that there is a chance that the current account deficit will grow from its current level of $115 billion in FY22-23.
India’s trade deficit hit a record high of $31.02 billion in July, up from $25.64 billion in June and $10.63 billion in July of last year.
Barclays also pointed out that the Reserve Bank of India has cut the amount of money that can be used to pay for imports because it has spent more than $60 billion to protect the rupee.
The economist said, “When the mood changes, we think the RBI’s reserves are likely to rise, which means heavy intervention on the other hand and little room for the rupee to rise quickly.”
Barclays thinks that the RBI will raise the repo rate by 35 basis points on August 5 and then again by 25 basis points in September and December, bringing it to 5.75 percent.
