| Current a/c turns surplus after 2 yrs | |
| BS Reporter / Mumbai July 1, 2009, 1:09 IST | |
On account of lower trade deficit and surplus invisibles account India’s current account recorded a surplus of $ 4.7 billion during the fourth quarter of 2008-09 as against $ 1.5 billion deficit in the corresponding quarter in 2007-08.
The current account balance saw this turnaround after two years. During the January-March 2007 current account increased by $ 4.2 billion.
Although invisibles declined by seven per cent in the fourth quarter it led to a surplus in the current account. Services increased by over 45 per cent to $ 10.99 billion as compared to $7.56 billion in the corresponding quarter in 2007-08. At the same time transportation increased to $ 424 million as against a dip of $215 million in January-March 2007-08.
STRIKING A FINE BALANCE
India’s Balance of Payments during January-March |
|
In $ billion
|
2007-08(PR) |
2008-09(P) |
% change |
| Exports |
53 |
40 |
-24.22 |
| Imports |
75 |
a54
|
-27.33 |
| Trade Deficit |
-22 |
-15 |
-34.67 |
| Invisibles (net) |
21 |
19 |
-7.1 |
| Current account balance |
-15 |
47 |
NA |
| Capital Account* |
27 |
-44 |
NA |
| Change in Reserves# |
-25 |
-3 |
NA |
(-Indicated increase, +indicates decrease)
* Including errors and omissions, #:On BoP basis excluding valuation.
P= Preliminary; PR= Partially Revised |
The slow pace of growth in software services pulled down the invisibles. Software declined by 11 per cent to $ 10.75 billion during the fourth quarter of the last financial year.
Private transfers mainly comprising of inward remittances from Indian workers abroad, local withdrawals from NRI rupee deposits declined to $ 9.58 billion.
With the foreign institutional investors facing liquidity crunch and pulling out of the Indian equity markets, the portfolio investment declined by 26 per cent. Portfolio investment comprise of foreign institutional investments which declined by $2.6 billion while the American depository receipts (ADRs) and global depository receipts (GDRs) witnessed net outflow of $ 20 billion during January-March 2008-09 mainly due to the lack of new issuances during the period.
The external commercial borrowings to India stood at $ 1.12 billion in the fourth quarter of the last financial year as against $5.22 billion during January-March 2007-08 due to the tight liquidity conditions in the overseas market.
As the banks revised the ceiling interest rate on NRI deposits, the deposits from this section rose by 95 per cent to $ 2.17 billion as compared to $ 1.1 billion in the fourth quarter of 2007-08. NRI deposits constitute major part of the foreign liabilities.
Banking capital mainly consists of foreign assets and liabilities of commercial banks turned negative to $ 5.43 billion as against a positive inflow of $ 4.71 billion.
Short term trade credit remained negative and witnessed net outflow of $ 5.49 billion as against an inflow of $ 6.49 billion during the corresponding quarter a year ago. The drop in short term trade credit reflected tightness in the overseas markets and increased repayments.
Since the portfolio investment, banking capital and short term trade credit continued with the outflow capital account witnessed a deficit of $4.4 billion as against $26.52 billion surplus in the capital account.
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