CAD may narrow to 0.7% of GDP in FY16, says Nomura

India's current account deficit is likely to narrow to 0.7 per cent of the gross domestic product in fiscal 2016 from 1.3 per cent in FY15 largely owing to low commodity prices, a Nomura report said on Wednesday.

According to the Japanese financial services major, the current account deficit is likely to narrow despite sluggish export volumes and rising import volumes.

"For FY16, we expect the current account deficit to narrow to 0.7 per cent of GDP from 1.3 per cent in FY15 as low commodity prices offset the impact of higher core imports and sluggish exports," Nomura said in a research note.

Meanwhile, falling for the 15th month in a row, exports dipped 5.66 per cent in February to $20.73 billion, while, imports declined 5.03 per cent to $27.28 billion last month.

The trade deficit -- difference between imports and exports -- stood at $6.54 billion in February this year compared with $6.74 billion in February last year.

The global brokerage firm said that it indicates recovery in the volume front as export volumes rose 7.7 per cent year-on-year in February after falling by an average of 2.8 per cent in the past six months.

"Overall, trade data suggest that both export and import volumes have picked up, with February's contraction in both exports and imports largely price-driven," Nomura said.

Meanwhile, after a sharp rise in January, gold imports in February declined 29.49 per cent to $1.39 billion, which is expected to keep a lid on the country's current account deficit.

India is the one of the largest importers of gold in the world and the imports mainly cater to the demand of jewellery industry.

In July-September of the current fiscal, CAD rose to $8.2 billion, or 1.6 per cent of GDP, from 1.2 per cent, or $6.1 billion in the April-June quarter.