India’s current account deficit (CAD) for the second quarter ended September 2009 was almost flat at $12.6 billion, compared to $ 12.57 billion in the same quarter in 2008, on lower net invisible surplus.
However, the deficit was two times higher than the $5.99 billion reported for April-June 2009, according to the Reserve Bank of India data on balance of payments (BoP).
While trade deficit declined from $ 39.2 billion in July-September 2008 to $32.2 billion in July-September 2009, the net invisibles surplus, reflecting activity in services and transfers, declined from $26.54 billion in the second quarter of last year to $19.57 billion in July-September 2009.
India's Balance of Payments ($ billion)
|2008-09 (PR)||2009-10 (P)|
|Current account deficit||12.58||12.63||0.40|
|Change in Reserves#||4.73||-9.42||
|(Indicated increase, +indicates decrease in change in reserve)
*: Including errors and omissions, #:On BoP basis excluding valuation. P:Preliminay PR: Partially Revised
For the first half of 2008-09 (April-September 2009), the deficit was higher at $ 18.61 billion compared to $15.84 billion in the same period last year.
Rupa Rege Nitsure, chief economist with Bank of Baroda, said the deficit might widen further as the import bill would grows due to a spurt in crude oil prices and a rise in non-oil imports. The growth in exports is expected to be modest.
The growth in exports and imports continued to decline during the second quarteer. The trade deficit, however, was lower, reflecting a larger fall in imports, especially oil imports, on account of lower oil prices compared with last year.
RBI said private transfer receipts continued to sustain their growth. Software services exports, however, were lower.
DR Dogra, managing director of CARE, said the Indian economy was showing strong signs of revival. Hence, imports may grow faster than exports, widening the trade deficit in third and fourth quarters, he said.
The trade balance has lowered mainly due to a fall in oil prices. However the situation will significantly reverse in the second half of the year as crude oil prices are exhibiting an upward bias on signs of recovery in major economies and drop in inventory levels.
Referring to capital flows in the second quarter, RBI said both gross capital inflows and outflows remained strong. Gross capital inflows during the second quarter of 2009-10 were $ 98.1 billion ($90.0 billion in Q2 of 2008-09), mainly on account higher foreign investment inflows of $55.8 billion.
Net capital flows were also substantially higher at $23.6 billion than the $ 7.1 billion in the second quarter of 2008-09, mainly due to large net foreign investment inflows and special drawing rights allocations by the International Monetary Fund.