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MOSL: ECOSCOPE-3QFY19 CAD in line with expectations; India’s Forex reserves decline

ECOSCOPE: 3QFY19 CAD in line with expectations; India’s Forex reserves decline

 

• India's current account deficit (CAD) came in at USD16.9b (2.5% of GDP) in 3QFY19 as against USD13.7b (2.1% of GDP) in the year ago quarter. The number is way lower than the market consensus of USD19.9b and nearly equal to our estimate of USD16.8b. Higher gold and net oil imports pushed up CAD; excluding gold and oil, CAD amounted to USD5.7b (2% of GDP), double of what was imported in the previous quarter.
• Capital inflows deteriorated to USD13.6b in 3QFY19 (2% of GDP) from USD22.5b in Q3FY18 (3.4% of GDP). They are insufficient to finance the CAD, leading to a higher drawdown of USD 4.3b from its reserves in 3QFY19.
• As per our calculations, (implied) domestic savings (domestic investments minus CAD) rose a notch to 29% in 3QFY19 from 28% a quarter ago. However, Domestic savings in the three quarters of FY19 was 28.6%, still lower than 29.2% in the same three quarters of FY18.
• We expect India's CAD to ~2.1% of GDP in FY19, up from 1.9% in FY18. As for our oil assumption, we expect it to be in the range of USD70 per barrel in FY20.