India’s current account deficit (CAD) widened but at a less than expected pace to $11.5 billion in the third quarter of the current fiscal year (Q3FY25) from $10.4 billion in the year-ago quarter, owing mainly to a higher merchandise trade deficit.

However, the CAD was still benign at 1.1% of GDP, similar to the year ago level. In Q2FY25, the CAD stood at 1.8% of GDP.

The current quarter (Q4FY25) is likely to see a current account surplus– both January ($16.5 billion) and February ($14 billion) saw trade deficits contained, as imports plunged sharply.

ICRA said it expects the current account to witness a surplus of ~$4-6 billion in Q4 FY2025, aided by a seasonal uptick in merchandise exports and the resulting moderation in the merchandise trade deficit, as well as healthy services surpluses.