Coronavirus Lockdown: Barclays says India’s current account may turn surplus

By Karthikeyan Sundaram
India is on course for a rare current-account surplus as the coronavirus pandemic roils demand for imports, according to Barclays Plc.

The bank’s current-account tracker points to a small deficit of $3 billion in 1Q 2020, followed by successive “unwelcome” surpluses, mirroring subdued economic activity, analysts led by Rahul Bajoria, its Mumbai-based senior economist, wrote in a note.

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“While low oil prices are serving as a tailwind for the economy, we think the bigger impact on the current account balance will come from reduced demand for both oil and non-oil imports,” wrote Bajoria and Shreya Sodhani.

India’s trade plunged in April as a nationwide lockdown to contain coronavirus ravaged supply chains and brought domestic demand to a halt in Asia’s third-largest economy. Exports shrank 60% from a year earlier, while imports declined 59%, helping narrow the trade gap to $6.76 billion from $9.8 billion in March, according to government data.

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India’s imports have contracted in 10 of the past 12 months amid a protracted slowdown even before the virus outbreak.

The trend has prompted Barclays to raise its current-account surplus forecast to $19.6 billion, or 0.7% of GDP, for the year to March from $10 billion previously. India reported a current-account deficit of $1.4 billion in the December quarter.