"We do not expect a significant renewed widening of India's current account deficit (CAD). Our assumption that commodity prices will remain low in 2016 and 2017 supports this view, while FDI inflows are likely to climb in response to government measures," it said.

In a report it said that India's external financing needs have diminished significantly over the last three years.

It said low commodity prices will keep imports in check and gradual pick up in domestic demand could push up import volumes.

"With commodity prices – particularly oil – likely to remain depressed, we do not expect a marked renewed widening of India's trade deficit," Moody's said.
A lower energy import bill and policies to curb gold demand are contributing to keeping the trade deficit at relatively low levels. The announcement in the Budget of an excise tax on gold is likely to dampen overall gold imports, it said.

Rising FDI will continue to cover CAD. Net FDI inflows hit an all-time high in January 2016, at USD 3.0 billion, more than financing the CAD for the first time since 2004, it added.

Moody's further said, "We expect FDI inflows to continue to rise. It provides a stable source of financing that will help to mitigate India's external financing risks."

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