India's current account deficit is likely to widen to 1.4 per cent of gross domestic product in the current fiscal from an estimated 0.9 per cent in 2015-16, says a Nomura report.

According to the Japanese financial services major, the global demand recovery is likely to stay sluggish but imports are expected to rise towards end of this year, following which the country's trade deficit is expected to widen.

"In our base case, we expect the global demand recovery to stay sluggish but imports to rise towards end-2016.

"As a result, we expect the current account deficit to widen to 1.4 per cent of GDP in FY17 from an estimated 0.9 per cent in FY16," Nomura said in a research note.

CAD narrowed to 1.4 per cent in April-December, from 1.7 per cent in the corresponding period of 2014-15.

According to the official data, exports dipped by 0.79 per cent to $22.17 billion, registering the 18th straight month fall in May.

Imports, too, contracted by 13.16 per cent to $28.44 billion in the month under review.

Trade deficit in May narrowed to $6.27 billion from $10.4 billion in the same month last year.

Nomura said: "Overall, the trade data indicate that domestic demand is in a recovery (mode), albeit a very weak one, while global demand is exhibiting early signs of improvement."

It added: "The trade data indicates that domestic demand is in a recovery, albeit a very weak one; and global demand remains very low although we view rising volumes as early signs of an improvement".

The image is used for representational purpose only. Photograph: Reuters