Current account deficit rebounds to 4.9% in Q1FY2014

Overall Balance of Payment records deficit of $0.35 billion in Q1FY2014

Current Account

* CAD increased to $21.8 billion (4.9% of GDP) in Q1FY14 from $16.9 billion (4.0% of GDP) in Q1FY13 owing to a rise in imports and some decline in merchandise exports.

* Gold imports stood at $ 7.3 billion in Q1FY14

* On BoP basis, merchandise exports declined 1.5% to $73.9 billion in Q1FY14 as compared with a decline of 4.8% in Q1FY13.

* In contrast, merchandise imports recorded an increase of 4.7% at $124.4 billion in Q1FY14 led by a steep rise in gold imports in the first two months of the quarter.

* Merchandise trade deficit (BoP basis) widened further to $50.5 billion in Q1FY14 from $43.8 billion a year ago.

* Growth in services exports moderated to 2.1% ($36.5 billion) in Q1FY14 as compared with 6.1% ($35.8 billion) in Q1 of the preceding year, imports of services registered a decline of 5.5% ($19.7 billion) as against a growth of 19.3% at $20.8 billion in the corresponding quarter of preceding year.

* As a result, net receipts of services during the quarter were higher at $16.9 billion as compared to $15.0 billion in the corresponding period of 2012-13.

* Net outflow of primary income amounting to $4.8 billion in Q1FY14 was lower than that in the preceding quarter ($5.2 billion) as well as the corresponding quarter ($4.9 billion) of 2012-13.

* The trade deficit, coupled with a slow recovery in net invisibles (income & services), led to widening of CAD to $21.8 billion in Q1FY14 from $16.9 billion in Q1FY13.

Capital Account

* Notwithstanding a net outflow in portfolio investment led by FII debt outflows, net inflows under capital and financial account (excluding changes in foreign exchange reserves) rose by 25.2% to $20.5 billion in Q1FY14 from $16.4 billion in Q1FY13 on account of increase in FDI and loans availed by banks.

* While net foreign direct investment surged to $6.5 billion in Q1FY14 from $3.8 billion in Q1FY13, net portfolio investment registered a marginal outflow of $0.2 billion as compared with an outflow of $2.0 billion in Q1FY13, primarily led by the debt component of FII investment.

* Outflow of portfolio investment occurred essentially from the third week of May 2013 after the US Fed indicated the possible tapering of quantitative easing.

* Net overseas borrowing by banks increased by 57.5% to $4.7 billion in Q1FY14 from $3.0 billion in Q1FY13.

* Net external commercial borrowings at $0.4 billion in Q1FY14 remained at the same level as that in Q1FY13.

* Higher repayments of trade credit moderated net inflows under 'trade credit & advances' to $2.5 billion in Q1FY14 from $5.4 billion in Q1FY13.

Overall Balance of Payment

* On BoP basis, there was a slight drawdown in foreign exchange reserves of $0.3 billion in Q1FY14 as against an accretion of $0.5 billion in Q1FY13.

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