India: Economy reeling under the deficit - Westpac

Oil is an important factor driving India’s current account balance, while it also affect its fiscal position, according to Frances Cheung, Head of Macro Strategy Asia at Westpac.

Key Quotes

“A USD10 increase in oil prices translates into a net USD13bn (via trade) deduction from the C/A for India in a year. This compares with a C/A deficit of USD49.5bn in the four quarters to Q2-2018 calendar year. This assumes prices rise uniformly across products, and does not take into account offsetting items such as remittances on the C/A.”

“In the run-up to the OPEC meeting on 6 December with uncertainty surrounding a potential production cut, USD/INR is likely to consolidate.”

“The RBI is likely to stay put on rates (5 December) with inflation contained.”