Current a/c deficit up at $5.4 bn

Rising global crude oil prices drive deficit up in the third quarter of 2007-08.

India's current account deficit grew to $5.38 billion during the third quarter of (October-December) of 2007-08 compared with $3.67 billion during the corresponding period last year.

A 41 per cent rise in import payments due to hardening global crude oil prices was one of the major reasons for pushing up the current account deficit. India's current account deficit accounts for roughly 0.5 per cent of the gross domestic product (GDP), estimated at a little over $1 trillion.

Trade deficit also went up to $25.3 billion during the third quarter of the current financial year as against $16.5 billion during the same period last year, the Reserve Bank of India (RBI) data on India's balance of payments (BoP) released today said. 
 

YAWNING GAP Major items of India's Balance of Payments
($ million) 'Item	October-December (Q3)
	2006P	2007PR
1.  Exports	30,933	41,737
2.  Imports	47,460	67,090
3. Trade Balance (1-2)	-16,527	-25,353
4. Invisibles, net	12,849	19,967
5. Current Account Balance (3+4)	-3,678	-5,386
6. Capital Account*	11,183	32,124
7. Change in Reserves# (- Indicates increase)	-7,505	-26,738
*: Including errors and omissions   #: On BoP basis excluding valuation                 PR: Partially Revised    P: Preliminary

Invisible receipts rose 30.4 per cent during October-December 2007 as against 27.2 per cent in the corresponding period in 2006. The rise was mainly due to the continued momentum in remittances from overseas Indians and also due to software and tourism earnings.

Total invisible receipts are estimated to have reached $38.4 billion with services enjoying a lion's share of $23.4 billion. The invisible payments at $18.4 billion during the third quarter showed rising payout for investment income comprising interest, dividends and profit. There was also growth in payments towards transportation ($3 billion during the third quarter of the year) and tourism ($2.5 billion) as more Indians travelled abroad for business and on vacation.

Net invisible receipts stood at $20.0 billion in the third quarter of the current financial year as against $12.8 billion in the corresponding period last year. Transfers from Indian workers overseas accounted for a major share in receipts. They sent around $27 billion in 2007, according to the latest data released by the World Bank, making India the highest recipient of remittances, ahead of China and Mexico.

Overseas Indians are bringing more money into the country to take advantage of the difference in interest rates prevailing in the global and the domestic market, an official with public sector bank said.

During October-December 2007, India's capital account surplus widened to $32.1 billion compared with $11.18 billion in the same period in 2006-07. At $31.5 billion in the third quarter of 2007-08, portfolio flows, external commercial borrowings (ECBs) and short-term trade credits contributed the most to net capital flows.

The high-growth potential and handsome returns from Indian stocks continued to be a big draw for global investors. Net portfolio investment grew four times to $14.7 billion in October-December 2007 over $3.6 billion in the third quarter of 2006-07. It remained the largest component of capital flows.

The net inward foreign direct investment in the third quarter was lower at $7.2 billion compared with $9.7 billion a year ago. Net ECBs raised by the Indian companies amounted to $5.3 billion as against $4 billion in October-December 2006-07.