India set to post Balance of Payments deficit for second straight year: Standard Chartered Bank

The foreign bank expects current account balance to slip into a deficit of three percent of gross domestic product this financial year from a surplus of 0.9 percent last year, before narrowing to 2.6 percent in fiscal year 2023-2024.

The BoP dynamics next year could be dominated by an absolute CAD financing requirement of around $100 billion, given the chances of higher global rates keeping debt-investment inflows cautious, the bank said.

The potentially improved risk appetite in the second half of the year could lead to net positive portfolio inflows, while an increased volatility in the banking capital segment may keep BoP forecasting "challenging," it added.

"While the C/A deficit may appear more manageable, it still represents a large financing requirement in absolute terms, especially given the weak global growth backdrop. Our forecast of a smaller C/A deficit/GDP ratio in FY24 assumes a narrower trade deficit, but slower software and remittance inflows contributing to a large deficit size," the foreign bank said.