Experts believe that CAD is expected to cross 2 percent of GDP in the quarter ended June against 1.9 percent in 2017-18.
Higher oil prices along with weakening domestic currency have put pressure on the country's import bill, which is expected to widen the current account deficit (CAD) in the financial year 2018-19.
"CAD will not be as good as last year...but it won't be as bad as it is being predicted because oil prices are not expected to rise,” a top Finance Ministry official said on Tuesday.
He added that CAD will be pretty much as per estimates, in the range of +/- 10 basis points.
CAD, a key measure of a country’s macroeconomic stability, is an excess of sum of exports of goods and services, as well as income receivable over imports and income payable.
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While the current account deficit had ballooned to 6.7 percent of GDP in 2012-13, the Modi government managed to keep the deficit to under 2 percent of GDP annually.
Experts believe that CAD is expected to cross 2 percent of GDP in the quarter ended June against 1.9 percent in 2017-18.
In addition, merchandise trade deficit hit a 62 month high of USD 18 billion in July, owing to higher gold purchase and elevated oil import bill, which will also have an impact on CAD.
“The current account deficit is likely to widen to USD 16-17 billion or around 2.5 percent of GDP in Q1 FY2019, from USD 14 billion in Q1 FY2018, with higher commodity prices offsetting the benefit of the contraction in gold imports,” ICRA said last week.
Similarly, Japanese financial services major Nomura had also said that CAD could widen to 2.8 percent of GDP in 2018-19.
Last week saw the Indian rupee plummeting to a record low of Rs 70.4/USD on the back of a stronger dollar and falling Turkish lira.
Rupee has fallen more than nine percent year-to-date and by two percent in August. The rupee closed at 69.81/USD on Tuesday.
Investors have been pulling out of emerging markets, betting on a stronger US economy. Asian currencies fell especially after lira tumbled about 28 percent in August and 40 percent year to date after the US decided to double import tariffs on the country's steel and aluminum.
The fall in local currency was also triggered after Turkey decided against a rate hike despite having a ballooning inflation.
However, the official said that despite weakening of the local currency, India is in a “comfortable position” as far foreign exchange reserve is concerned.
"In present case, over the last five years, rupee vis a vis all emerging markets' currency, whether euro, GBP or Chinese yuan, has never been so stable... The only exception is US dollar where our currency hasn't as much depreciated as the dollar has appreciated.. Which has appreciated against every currency," the official said.