Current account deficit during the first quarter was due to higher imports.
After two quarters of deficit, India’s capital account was back in surplus in the first quarter of the current financial year, mainly on account of foreign institutional flows and higher foreign direct investment (FDI).
However, after a quarter of current account surplus, current account balance was in deficit during April-June 2009 as trade deficit widened due to higher imports, the latest data released by the Reserve Bank of India (RBI) showed.
| BoP FINEPRINT Major items of India's balance of payments ($mn) | |||
| Apr-Jun '08 | Jan-Mar '09 | Apr-Jun '09 | |
| Exports | 49,120 | 39,820 | 38,789 |
| Imports | 80,545 | 54,418 | 64,775 |
| Trade balance | -31,425 | -14,598 | -25,986 |
| Net invisibles | 22,406 | 19,345 | 20,179 |
| Current account balance | -9,019 | 4,747 | -5,808 |
| Capital account balance | 11,254 | -4,447 | 5,923 |
| Change in reserves* | -2,235 | -300 | -115 |
| * On BoP basis (excluding valuation) Source: RBI | |||
On a balance-of-payment basis, excluding valuations, reserves rose $115 million during the first quarter of the current financial year. The depreciation of the US currency against all major currencies resulted in rise in valuation of foreign currency reserves by $13.2 billion, though there was only a marginal increase in actual reserves.
During the first quarter of the current financial year, trade deficit was estimated at around $26 billion, as against $31.43 billion during April-June 2008. Net invisibles, however, fell 9.95 per cent to $20.18 billion. This was on account of a marginal decrease in invisible receipts (to $38.68 billion in the first quarter of this year from $38.94 billion a year ago), while invisible payments went up by 12 per cent to $18.51 billion.
The fall in invisible receipts was mainly on account of a 3 per cent fall in receipts from services to $22.39 billion, largely due to lower software exports. During the first quarter of the current financial year, software exports were estimated to have dropped by 11.51 per cent to $10.76 billion, from $12.16 billion during April-June last year. Non-software exports, however, rose 30.7 per cent to $6.36 billion.
Private transfers, mainly remittances from overseas Indians and local withdrawals from NRI rupee deposits, went up 8.37 per cent to $13.34 billion. Investment income, the third element of invisible receipts, dropped over 20 per cent to $2.72 billion during the first quarter of 2009-10.
In case of the capital account, gross capital inflows revived during the first quarter of the year as foreign institutional investors (FIIs) more than made up for the absence of depository receipts and external commercial borrowings by Indian companies.
As against outflows during the previous four quarters, portfolio investment turned around with net inflows of $8.27 billion. Last year, in the wake of the financial crisis, overseas investors were pulling out of emerging markets such as India and repatriating funds to home markets.
During the first quarter of the current financial year, FDI inflows of $9.46 billion, though 20 per cent lower than April-June 2008, were higher than that during the last three quarters.
“NRI deposits also witnessed higher inflows, reflecting the positive impact of the revision in the ceiling interest rate on NRI deposits,” RBI said.
