'Commodity prices may push CAD to 1.3% in FY22'

Mumbai: Rising global commodity prices, led by crude, coal and metals, will shave a lot off the current account leading to higher imports and a rise in current account deficit, which is likely to print at 1.3 per cent of the GDP or $40 billion, up from 0.9 per cent surplus last fiscal, according to a brokerage report.

However, the report, by the Wall Street major Bank of America Securities, said the balance of payments (BoP) is strong enough to defend any US Federal Reserve taper impacts on the rupee and the bond yields even though the BoP peak is history now.

Given the sharp increase in global commodity prices, particularly oil, concerns about current account deficit (CAD) and its serviceability have resurfaced. Potential taper by the Fed has only added to these jitters. "But, we see FY22 CAD at 1.3 per cent of GDP or $40 billion, up from a 0.9 per cent surplus in FY21, but still well-contained under the threshold of 2.5 per cent of GDP," BofA said on Tuesday.

On the other hand, capital account surplus is expected to rise despite moderating foreign inflows and a steady FDI on account of other sub-components faring better in FY22 than in FY21, it adds.