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Date : 02 Dec 2013
Developments in India’s Balance of Payments during the Second Quarter (July-September) of 2013-14

Preliminary data on India’s balance of payments (BoP) for the second quarter (Q2), i.e., July-September 2013, of the financial year 2013-14, are now available and presented in Statements I and II. While Statement I presents BoP data in BPM6 format, Statement II provides the same as per the old format.

Developments in India’s BoP during July-September 2013

  • India’s current account deficit (CAD) narrowed sharply to US$ 5.2 billion (1.2 per cent of GDP) in Q2 of 2013-14 from US$ 21.0 billion (5.0 per cent of GDP in Q2 of 2012-13), also much lower than 4.9 per cent of GDP in Q1 of 2013-14. The lower CAD was primarily on account of a decline in the trade deficit as merchandise exports picked up and imports moderated, particularly gold imports.

  • On a BoP basis, merchandise exports increased by 11.9 per cent to US$ 81.2 billion in Q2 of 2013-14 on the back of significant growth especially in the exports of ‘textile and textile products’, ‘leather & leather products’ and chemicals.

  • On the other hand, merchandise imports at US$ 114.5 billion, recorded a decline of 4.8 per cent in Q2 of 2013-14 as compared with a decline of 3.0 per cent in Q2 of 2012-13, primarily led by a steep decline in gold imports,which amounted to US$ 3.9 billion as compared to US$ 16.4 billion in Q1 of 2013-14 and US$ 11.1 billion in Q2 of 2012-13.

  • As a result, the merchandise trade deficit (BoP basis) contracted to US$ 33.3 billion in Q2 of 2013-14 from US$ 47.8 billion a year ago.

  • Net invisibles during Q2 of 2013-14 improved, essentially reflecting a rise in net services exports. Net services at US$ 18.4 billion recorded a growth of 12.5 per cent in Q2 of 2013-14 (y-o-y) mainly on account of ‘computer services’.

  • Net outflow on account of primary income (profit, dividend and interest) amounting to US$ 6.3 billion in Q2 of 2013-14 was higher than that in the preceding quarter (US$ 4.8 billion) as well as the corresponding quarter (US$ 5.6 billion) of 2012-13. Gross transfers receipts at US$ 17.3 billion showed an increase of 2.6 per cent (y-o-y).

  • While foreign direct investment recorded net inflows of US$ 6.9 billion in Q2 of 2013-14, net portfolio investment registered an outflow of US$ 6.6 billionin the wake of indication given by US Federal Reserve about the tapering of its quantitative easing programme.There was a marginal net outflow of US$ 0.8 billion under equities while the debt component of net FII flows recorded a higher outflow of US$ 5.7 billion.

  • ‘Loans’(net) availed by deposit taking corporations (commercial banks)witnessed an outflow of US$ 6.7 billion in Q2 of 2013-14 owing to repayments of overseas borrowings and a build-up of their overseas foreign currency assets. Under ‘currency & deposits’, net inflows of NRI deposits amounted to US$ 8.3 billion in Q2 of 2013-14 as compared to US$ 2.8 billion in the corresponding quarter of 2012-13. Loans (net) availed by others (ECBs) at US$1.3 billion, however, showed an increase of 8.8 per cent over the same quarter of the preceding year. Trade credits and advances recorded a decline mainly on account of higher repayments.

  • On a BoP basis, there was a drawdown of foreign exchange reserves of US$ 10.4 billion in Q2 of 2013-14 as compared to that of US$ 0.2 billion in Q2 of 2012-13 (Table 1).

Developments in India’s BoP during April-September 2013

  • The turnaround in export growth and decline in imports from July 2013 onwards led to a sharp improvement in the trade deficit to US$ 83.8 billion in H1 of 2013-14 from US$ 91.6 billion in H1 of 2012-13.

  • Contraction in the trade deficit coupled with a rise in net invisibles receipts resulted in a reduction of the CAD to US$ 26.9 billion (3.1 per cent of GDP) in H1 of 2013-14 from US$ 37.9 billion (4.5 per cent of GDP) in H1 of 2012-13.

  • Net inflows under the capital and financial account (excluding change in foreign exchange reserves) declined to US$ 15.1 billion in H1 of 2013-14 from US$ 37.0 billion in H1 of 2012-13 owing to net outflows of portfolio investment.

  • Notwithstanding a lower CAD during H1 of 2013-14, there was a drawdown of foreign exchange reserve to the tune of US$ 10.7 billion as against an accretion of US$ 0.4 billion in H1 of 2012-13 mainly due to a decline in net capital inflows under the financial account.

Table 1: Major Items of India's Balance of Payments

(US$ Billion)

Jul - Sep 2013
(P)

Jul - Sep 2012 (PR)

Apr-Sep 2013
(P)

Apr-Sep 2012
(PR)

 

Credit

Debit

Net

Credit

Debit

Net

Credit

Debit

Net

Credit

Debit

Net

A Current Account

138.3

143.5

-5.2

127.3

148.3

-21.0

269.3

296.2

-26.9

257.7

295.6

-37.9

1. Goods

81.2

114.5

-33.3

72.6

120.4

-47.8

155.2

238.9

-83.8

147.6

239.2

-91.6

Of which:

                       

POL

17.9 

41.0 

-23.1 

14.2 

40.7 

-26.4 

32.0 

83.0 

-51.0 

27.5 

80.0 

-52.5 

2.Services

36.7

18.3

18.4

35.0

18.7

16.3

73.2

37.9

35.2

70.8

39.5

31.3

3. Primary Income

3.1

9.4

-6.3

2.8

8.4

-5.6

5.6

16.8

-11.2

5.0

15.4

-10.5

4. Secondary Income

17.3

1.2

16.1

16.9

0.8

16.1

35.3

2.6

32.8

34.4

1.5

32.9

B. Capital Account and Financial Account

130.7

125.8

5.0

109.9

89.1

20.8

265.7

239.9

25.8

219.4

182.8

36.6

Of which:

                     

Change in Reserve (Increase (-)/Decrease (+))

10.4

10.4

0.2

0.2

10.7

10.7

0.4

-0.4

C. Errors & Omissions

   

0.2

   

0.2

   

1.1

   

1.3

(-)(A+B)

P: Preliminary; PR: Partially Revised.

Note: Total of sub-components may not tally with aggregate due to rounding off.

Alpana Killawala
Principal Chief General Manager

Press Release : 2013-2014/1112

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