| Date: |
08-02-2011 |
| Subject: |
Egypt Unrest To Affect India''s Current Account Deficit: Citi |
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New Delhi, Feb 7 (PTI) The unrest in Egypt will adversely impact India''s current account deficit as crude prices would rise and remittance from expatriates would be under strain, global banking giant Citi said today.
India''s oil imports could come under pressure if the current political standoff in Egypt continues and instability spreads to other countries in the region, Citi said in a report ''Unrest in the Middle East & North Africa Macro Implications for India''.
India''s current account deficit--which represents the difference of inflows and outflows of foreign exchange barring capital movements-- surged 72 per cent to USD 15.8 billion in the July-September quarter over USD 9.2 billion in the same period last year due to higher imports.
According to experts, a high current account deficit would make the economy more dependent on foreign capital as domestic savings would not be able to fund all investment requirement.
"With the Middle East producing 30 per cent of world''s oil, prolonged unrest could result in oil prices trending higher. This would impact India''s already deteriorating current account deficit, lead to higher subsidies and inflation," the report said.
The Gulf region contributes around 60 per cent of India''s total crude oil requirement.
Global crude prices, already under pressure due to an early onset of winter in US and Europe, surged to a 28-month high of over USD 102 per barrel last week.
Citi said the Middle East region is also India''s largest export market, with a share of 22.4 per cent of the country''s overseas shipments headed there. The continuation of political instability could affect this as well.
"Given the high unemployment rate in economies, migrant workers may be retrenched," Citi said. Of the total remittance inflows of USD 52 billion sent by expatriate Indians in 2010, the Middle-Eastern economies had a share of 48 per cent or USD 26 billion.
However, remittance flows from Egypt were only USD 3.7 million.
Public unrest has already deposed Tunisia''s long-serving President Zine al Abedine ben Ali.
Source : news.in.msn.com
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