Positive Outlook:
- Goldman Sachs revised its projections for India's current account deficit (CAD) downwards for both 2023-24 and 2024-25, highlighting favorable external balances.
- This optimistic outlook is driven by:
- Lower CAD: Revised projections of 1% and 1.3% for 2023-24 and 2024-25, respectively, down from earlier estimates.
- Strong capital flows: Robust equity portfolio and FDI inflows expected due to US Fed easing and global supply chain diversification.
- Adequate foreign exchange reserves: Reserves exceeding $620 billion provide a buffer against external shocks.
- Low external debt: Low debt levels further strengthen India's external position.
- Weaker dollar: Potential for five US Fed rate cuts in 2024 is expected to weaken the dollar, benefiting India.
Aslo See:- https://markettalkshop.blogspot.com/2023/12/india-corporate-sector-trends-2024.html
Key Drivers:
- Falling oil prices: Projected average price of $81 per barrel in 2024, reducing import costs and improving the trade balance.
- Strong services exports: Surprising upside in both business and software services exports, contributing to the surplus.
- Resilient US growth: Continued US economic growth supports demand for Indian exports.
Overall:
Goldman Sachs paints a positive picture of India's external balances, citing favorable conditions driven by lower CAD, strong capital flows, and a weakening dollar. However, a projected decline in the balance of payment surplus from 2024 to 2025 indicates potential need for continued monitoring.
Also See :- https://markettalkshop.blogspot.com/2023/12/passive-vs-active-story-of-stock-market.html
Additional Points:
- Lower oil imports in the January-November 2023 period due to falling oil prices.
- Rising services trade surplus due to strong export performance.
- Q2 2023-24 saw a narrowing of CAD due to lower merchandise trade deficit and higher services exports.
Also see :- https://markettalkshop.blogspot.com/2023/12/world-second-largest-economy-china.html
Great read! I appreciate the positive outlook Goldman Sachs paints for India's current account deficit. The revised projections, with lower CAD and strong capital flows, indeed seem promising. The comprehensive analysis of key drivers, from falling oil prices to resilient US growth, adds depth to the optimistic view. I'm curious about the potential challenges or risks that might impact this positive scenario. What factors should we be mindful of as we navigate through 2024-25?
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