India’s balance of payments (BoP), which had deteriorated sharply in 2011-12, showed some
improvement in Q1 of 2012-13. The merchandise trade deficit in H1 of 2012-13 has remained at
the same level compared to H1 of 2011-12, as fall in exports due to sluggish global demand was
almost equally matched by import contraction mainly reflecting slowdown in domestic economic
activity. This, coupled with the trend of falling surplus in services trade over the medium term, is
likely to leave the current account deficit (CAD) too wide for comfort. CAD financing pressures
can re-emerge in the face of event risks, although the recent policy measures announced by the
government have helped boost portfolio inflows for now. The rupee strengthened on the back of
these flows. Though external vulnerability indicators generally deteriorated in Q1 of 2012-13,
India’s net international investment position (NIIP) improved, largely due to valuation effects.
Global growth uncertainties continue to
impinge on export growth
III.1 India’s export growth, which had lost
momentum in the second half of 2011-12,
mainly owing to a slowdown in external
demand, has shown further deterioration in
2012-13 so far (Table III.1). Exports contracted
by 6.8 per cent in H1 of 2012-13, with the pace
of decline turning more pronounced in Q2. This
also shows that the expected positive effects of
exchange rate depreciation on exports were muted by weak global demand in the more
uncertain macroeconomic environment.
Destination-wise data available up to August
2012 suggest that this uncertainty was
particularly reflected in the considerable decline
in exports to the euro area. Recently, growth in
exports to China has also turned negative.
Demand from other important export
destinations, viz., the US and the OPEC
countries however, remained somewhat intact.
Export demand from most other regional and non-traditional markets, in particular from
Southeast Asia and Latin America, has
moderated.
Table III.1: India’s Merchandise Trade |
|
Item |
April–March |
April-September |
2010-11 (R) |
2011-12 (P) |
2011-12 (R) |
2012-13 (P) |
Value |
Growth (%) |
Value |
Growth (%) |
Value |
Growth (%) |
Value |
Growth (%) |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
9 |
Exports |
251.1 |
40.5 |
304.6 |
21.3 |
154.1 |
40.4 |
143.7 |
-6.8 |
Of which: |
Oil |
41.5 |
47.1 |
55.6 |
34.0 |
29.2 |
65.2 |
25.6 |
-12.3 |
|
Non-oil |
209.7 |
39.3 |
249.0 |
18.8 |
125.0 |
35.7 |
118.1 |
-5.5 |
|
Gold |
6.1 |
41.9 |
7.0 |
14.8 |
3.6 |
42.3 |
3.1 |
-13.8 |
|
Non-Oil Non-Gold |
203.5 |
39.1 |
242.0 |
18.9 |
121.4 |
35.5 |
115.0 |
-5.3 |
Imports |
369.8 |
28.2 |
489.4 |
32.4 |
243.5 |
38.1 |
232.9 |
-4.4 |
Of which : |
Oil |
106.0 |
21.6 |
154.9 |
46.2 |
75.7 |
51.8 |
80.8 |
6.8 |
|
Non-oil |
263.8 |
31.1 |
334.5 |
26.8 |
167.9 |
32.7 |
152.1 |
-9.4 |
|
Gold |
40.5 |
41.6 |
56.2 |
38.8 |
28.4 |
62.7 |
19.1 |
-32.9 |
|
Non-Oil Non-Gold |
223.3 |
29.3 |
278.3 |
24.6 |
139.5 |
27.9 |
133.1 |
-4.6 |
Trade Deficit |
-118.6 |
|
-184.8 |
|
-89.4 |
|
-89.3 |
|
Of which: |
Oil |
-64.5 |
|
-99.3 |
|
-46.5 |
|
-55.2 |
|
|
Non-oil |
-54.1 |
|
-85.5 |
|
-42.9 |
|
-34.0 |
|
|
Non-Oil Non-Gold |
-19.8 |
|
-36.3 |
|
-18.1 |
|
-18.0 |
|
R: Revised P: Provisional.
Source: DGCI&S. |
III.2 Major exporting sectors that have been
significantly affected due to weak external
demand include engineering goods, gems and
jewellery, textile and textile products and
petroleum products. Apart from sluggish
external demand, the softening of international
commodity prices, particularly metal prices,
might also have contributed to the reduced value
of exports from some of these sectors. Despite
the measures taken to ease economic and
financial conditions in the US and the euro area,
the risk of a further worsening of global trade
prospects continues. Against the backdrop of
these uncertainties, achieving the export target
of US$ 360 billion during 2012-13 looks
challenging.
Import contraction, mainly due to
slowdown in domestic growth
III.3 Imports contracted by 4.4 per cent during
H1 of 2012-13, mainly reflecting subdued
domestic economic growth coupled with
depressed export prospects (Chart III.1). While
the significant deceleration in economic activity
helped keep the growth in petroleum, oil and
lubricants (POL) imports at a moderate 6.8 per
cent in H1 of 2012-13, non-oil imports declined
by 9.4 per cent, largely led by significantly
lower imports of gold. This possibly reflected the impact of a rise in customs duty, the policy
to restrain gold loans by NBFCs and rupee
depreciation. A decline in imports of exportrelated
items and capital goods possibly
indicates slowdown in export-oriented sectors
and concerns relating to a slowdown in domestic
investment.
III.4 With fall in exports being almost equally
matched with fall in imports in value terms,
India’s merchandise trade deficit at about US$
89 billion in H1 of 2012-13 was at the same
level as in H1 2011-12. Going forward, with
global oil prices for the Indian basket remaining
firm, a reduction in the total oil import bill may
be difficult. Further, export demand is likely to
be constrained by deteriorating global growth
prospects and decelerating global trade.
Low import and export elasticities prevent
improvement of trade balance despite
significant depreciation
III.5 Estimates show that the elasticity of
India’s non-oil exports to REER is around 0.4
with a lag of one year. This is essentially
because of sizeable import content of exports
and slower supply responses to price changes.
Similarly, price elasticity of non-oil imports is
estimated to be statistically insignificant as it
includes price insensitive components like gold
and also fertilisers which does not have full
pass-through. Furthermore, price elasticity of
net POL imports is only 0.1. Even though these
estimates are sensitive to the estimation methods, the time period used and the choice
of variables, they indicate that the impact of
depreciation of the exchange rate on India’s
exports and imports is low. Estimates assessing
existence of ‘J’ curve effect show that changes
in both overall trade balance (ratio of exports
to imports) as also in the non-oil trade balance
are statistically insignificant to REER
movements.
|
Fall in trade deficit and higher secondary
income led to lower CAD in Q1 of 2012-13
III.6 The impact of moderation in the trade
deficit and improved net receipts on account of
secondary income compared to Q1 of 2011-12,
was discernible in a lower current account
deficit in Q1 of 2012-13. Offsetting the impact
of lower net receipts in services exports on CAD
in Q1, secondary income, mainly representing
private transfers, remained buoyant, perhaps encouraged by depreciation of the rupee.
Nonetheless, the CAD-GDP ratio was marginally
higher at 3.9 per cent in Q1 of 2012-13
compared with Q1 of 2011-12, mainly on
account of lower nominal GDP in dollar terms
partly due to depreciation of the rupee
(Table III.2). Going forward, the trend in various
components of services exports, particularly
business services, and private transfers would
largely depend on economic activities in trading
partner countries and movement in the rupee
exchange rate. Current indications are that CAD
could widen again in Q2 of 2012-13.
Turnaround in FII flows may improve
financing of CAD
III.7 Q2 of 2012-13 witnessed a turnaround in
FII flows. While in Q1 of 2012-13, FIIs
disinvested in the equity segment that were
partially offset by their net investments in the debt segment, FII investments in Q2 improved
distinctly in both segments. There was a surge
in portfolio inflows after the reform measures
were initiated in mid-September 2012, with net
FII investment of over US$ 5.5 billion in a
month and a half. FDI flows to India moderated
to US$ 10.7 billion during April-August 2012
compared with US$ 19.6 billion during April-
August 2011 (Table III.3).
Table III.2: Major Items of India’s Balance of Payments |
(US$ billion) |
|
2010-11
(PR) |
2011-12
(P) |
2011-12 |
2012-13 |
Q1(PR) |
Q2
(PR) |
Q3
(PR) |
Q4
(P) |
Q1
(P) |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
1. Goods Exports |
250.6 |
309.8 |
78.8 |
79.6 |
71.5 |
80.0 |
76.7 |
2. Goods Imports |
381.1 |
499.5 |
123.7 |
124.1 |
120.1 |
131.7 |
119.2 |
3. Trade Balance (1–2) |
-130.5 |
-189.7 |
-44.9 |
-44.5 |
-48.6 |
-51.7 |
-42.5 |
4. Services Exports |
131.7 |
140.9 |
33.7 |
32.3 |
37.3 |
37.7 |
34.4 |
5. Services Imports |
83.0 |
76.9 |
17.4 |
18.3 |
21.1 |
20.0 |
20.2 |
6. Net Services (4–5) |
48.7 |
64.0 |
16.3 |
14.0 |
16.1 |
17.7 |
14.2 |
7. Goods & Services Balances (3+6) |
-81.8 |
-125.7 |
-28.6 |
-30.5 |
-32.4 |
-34.0 |
-28.3 |
8. Primary Income (Net) |
-17.3 |
-16.0 |
-3.6 |
-4.0 |
-3.8 |
-4.6 |
-4.9 |
9. Secondary Income (Net) |
53.1 |
63.5 |
14.8 |
15.6 |
16.2 |
16.9 |
16.8 |
10. Net Income 8+9) |
35.8 |
47.5 |
11.2 |
11.6 |
12.4 |
12.3 |
11.9 |
11. Current Account Balance (7+10) |
-46.0 |
-78.2 |
-17.4 |
-18.9 |
-20.2 |
-21.7 |
-16.4 |
12. Capital Account Balance |
0.04 |
-0.1 |
-0.3 |
0.2 |
0.1 |
-0.2 |
-0.2 |
13. Financial Account Balance |
48.9 |
80.7 |
18.7 |
19.0 |
20.6 |
22.4 |
16.5 |
of which: Change in Reserves [(-) increase/ (+) decrease] |
-13.1 |
12.8 |
-5.4 |
-0.3 |
12.8 |
5.7 |
-0.5 |
14. Errors & Omissions (11+12–13) |
-3.0 |
-2.4 |
-0.9 |
-0.4 |
-0.5 |
-0.6 |
0.1 |
Memo : As a ratio to GDP |
|
|
|
|
|
|
|
15. Trade Balance |
-7.7 |
-10.3 |
-9.8 |
-9.9 |
-10.7 |
-10.6 |
-10.0 |
16. Net Services |
2.9 |
3.5 |
3.6 |
3.1 |
3.5 |
3.6 |
3.3 |
17. Net Income |
2.1 |
2.6 |
2.4 |
2.6 |
2.7 |
2.5 |
2.8 |
18. Current Account Balance |
-2.7 |
-4.2 |
-3.8 |
-4.2 |
-4.4 |
-4.5 |
-3.9 |
19. Capital and Financial Account, Net (Excl. changes in reserves) |
3.7 |
3.7 |
5.2 |
4.4 |
1.7 |
3.4 |
4.0 |
Note: Total of subcomponents may not tally with aggregate due to rounding off.
PR: Partially Revised. P: Preliminary. |
III.8 The strong FII inflows since mid-
September 2012 are mainly the outcome of a
perception change among foreign investors
following policy measures announced by the
government (refer to Table VII.1 for details).
III.9 Balance of payment (BoP) statistics for
Q1 of 2012-13 show that, overall, capital flows
were sufficient to finance the CAD as evident
in the marginal accretion to India’s foreign
exchange reserves.
III.10 Among debt-creating flows, external
commercial borrowings (ECBs) witnessed some
recovery in Q2 of 2012-13 over the preceding
quarter, but they remained substantially lower
than Q2 of 2011-12. Despite the easing of policy
measures with regard to ECBs in recent months,
the Indian corporate sector seems to have shied
away from raising ECBs, reflecting the rising
risk aversion, as also the more limited demand
for such funds given the rise in corporate
leverage, and slack in investment demand.
Given the exchange risk or hedging cost due to
economic uncertainty, ECBs involve higher debt
service cost in rupee terms for corporate
borrowers. Flows under trade credit and NRI
deposits have been robust so far. While rupee
depreciation and deregulation/increase in
interest rates accelerated the momentum in
flows of NRI deposits in Q1, the pace of flows
has moderated in recent months (Table III.4)
III.11 Going forward, capital inflows will
depend on credible implementation of reform
policies, including fiscal consolidation, and
global economic conditions. The recent
announcement of QE3 by the US Federal Reserve is likely to be positive for capital flows
to emerging economies like India. Nevertheless,
the weak global and domestic growth outlook
coupled with euro area risks may create
uncertainty that can heighten global risk
aversion.
Table III.3: Capital Flows |
(US$ billion) |
Component |
2011-12 |
2012-13 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Average of the monthly flows |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
FDI in India |
4.1 |
3.1 |
2.3 |
1.5 |
2.0 |
2.4* |
FDI by India |
1.0 |
1.0 |
0.6 |
1.0 |
0.7 |
0.3* |
FIIs |
0.8 |
-0.5 |
0.6 |
4.7 |
-0.6 |
2.6* |
ADRs/GDRs |
0.1 |
0.1 |
0.03 |
0.01 |
0.01 |
0.03 |
ECB |
1.0 |
1.6 |
1.1 |
0.6 |
0.2 |
0.3 |
NRI |
0.4 |
0.9 |
1.1 |
1.6 |
2.2 |
0.2* |
*: July–August. |
Rupee exhibit strengthening bias on the
back of FII inflows and QE
III.12 Subsequent to a depreciation of 7.1 per
cent in Q1 of 2012-13 over Q4 of 2011-12 (on
average basis), the rupee remained relatively
weak against the dollar in July-August 2012,
largely guided by external developments.
Nevertheless, net FII inflows of over US$ 3.7
billion during this period helped the rupee move
in a narrow range of `54.6 to 56.4 per dollar.
However, since the second week of September
2012, the rupee has shown recovery against the
US dollar. This followed the announcement of
QE3 by the US Federal Reserve that has since
weakened the US dollar in the global currency
markets, as also the surge in capital inflows to
India following its reforms measures. Since
October 8, 2012 however, rupee has weakened
mainly due to demand for dollar by oil importing
firms. Reflecting the trend in rupee in nominal
terms, the REER based on 6-currency and
36-currency as on October 19, 2012 showed a
depreciation of 4.1 per cent and 3.2 per cent,
respectively, over end-March 2012 (Table III.5).
Table III.4: Disaggregated Items of Financial Account |
(US$ billion) |
|
2010-11 (PR) |
2011-12 (P) |
2011-12 |
2012-13 |
Q1 (PR) |
Q2 (PR) |
Q3 (PR) |
Q4 (P) |
Q1 (P) |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
8 |
1. Direct Investment (net) |
9.4 |
22.1 |
9.3 |
6.5 |
5.0 |
1.4 |
4.2 |
1.a Direct Investment to India |
25.9 |
33.0 |
12.4 |
9.5 |
6.9 |
4.2 |
6.2 |
1.b Direct Investment by India |
-16.5 |
-10.9 |
-3.1 |
-3.0 |
-1.9 |
-2.9 |
-2.0 |
2. Portfolio Investment |
28.2 |
16.6 |
2.3 |
-1.4 |
1.8 |
13.9 |
-2.0 |
2.a Portfolio Investment in India |
29.4 |
16.8 |
2.5 |
-1.6 |
1.9 |
14.1 |
-1.7 |
2.b Portfolio Investment by India |
-1.2 |
-0.2 |
-0.2 |
0.2 |
-0.04 |
-0.2 |
-0.3 |
3. Financial Derivatives & Employee Stock Options |
- |
- |
- |
- |
- |
- |
-0.5 |
4. Other Investment |
24.4 |
29.2 |
12.6 |
14.2 |
1.0 |
1.4 |
15.3 |
4.a Other equity (ADRs/GDRs) |
2.0 |
0.6 |
0.3 |
0.2 |
0.1 |
0.03 |
0.1 |
4.b Currency and deposits |
3.8 |
12.1 |
1.2 |
3.1 |
3.2 |
4.6 |
6.5 |
Deposit-taking corporations, except the central bank: (NRI Deposits) |
3.2 |
11.9 |
1.2 |
2.8 |
3.3 |
4.7 |
6.6 |
4.c Loans* |
18.6 |
16.8 |
14.9 |
9.5 |
-7.7 |
-0.03 |
3.8 |
4.c.i Loans to India |
18.3 |
15.7 |
14.9 |
8.9 |
-8.1 |
-0.02 |
3.7 |
Deposit-taking corporations, except the central bank |
1.2 |
4.1 |
11.5 |
3.9 |
-8.7 |
-2.6 |
3.0 |
General government (External Assistance) |
5.0 |
2.5 |
0.4 |
0.3 |
1.4 |
0.3 |
-0.1 |
Other sectors (ECBs) |
12.2 |
9.1 |
3.0 |
4.7 |
-0.8 |
2.3 |
0.8 |
4.c.ii Loans by India |
0.3 |
1.0 |
-0.02 |
0.6 |
0.5 |
-0.01 |
0.1 |
General government (External Assistance) |
-0.03 |
-0.2 |
-0.04 |
-0.04 |
-0.04 |
-0.04 |
-0.1 |
Other sectors (ECBs) |
0.3 |
1.2 |
0.02 |
0.6 |
0.5 |
0.03 |
0.1 |
4.d Trade credit and advances |
11.0 |
6.7 |
3.1 |
2.9 |
0.6 |
0.2 |
5.4 |
4.e Other accounts receivable/payable - other |
-11.1 |
-6.9 |
-6.8 |
-1.5 |
4.9 |
-3.3 |
-0.4 |
5. Reserve Assets |
-13.1 |
12.8 |
-5.4 |
-0.3 |
12.8 |
5.7 |
-0.5 |
Financial Account (1+2+3+4+5) |
48.9 |
80.7 |
18.7 |
19.0 |
20.6 |
22.4 |
16.5 |
*: Includes External Assistance, ECBs, non-NRI Banking Capital and Short-term trade credit.
P: Preliminary. PR: Partially Revised. – : Not available.
Note: Total of subcomponents may not tally with aggregate due to rounding off. |
Table III.5: Nominal and Real Effective Exchange Rates: Trade-Based
(Base: 2004-05=100) |
(Variations in Per cent, appreciation+/depreciation-) |
|
Index
Oct 19,
2012 (P) |
Y-o-Y
Variation
(Average) 2011-12 |
2012-13
(Oct 19, 2012 over end-Mar 2012) |
1 |
2 |
3 |
4 |
36-REER |
92.3 |
-3.2 |
-3.2 |
36-NEER |
79.4 |
-6.4 |
-4.3 |
30-REER |
84.7 |
-2.9 |
-2.4 |
30-NEER |
81.5 |
-5.4 |
-4.4 |
6-REER |
105.1 |
-6.8 |
-4.1 |
6-NEER |
76.3 |
-7.9 |
-4.5 |
`/US$ (Average) |
54.5 |
-4.9 |
-12.0# |
`/US$ (end-March) |
53.7* |
-12.7 |
-4.8* |
NEER: Nominal Effective Exchange Rate.
REER: Real Effective Exchange Rate.
P: Provisional. *: As on October 19, 2012.
#: April-October 19, 2012 over April 2011-March 2012.
Note: Rise in indices indicates appreciation of the rupee and vice versa. |
External debt increased moderately due to
valuation gains
III.13 India’s external debt registered an
increase of 1.1 per cent on a q-o-q basis as at
end-June 2012, primarily on account of a rise
in non-resident external rupee-denominated
deposits (NRE), reflecting the impact of
deregulation of interest rates of these deposits
in December 2011. Short-term trade credit
witnessed a significant increase, due to higher
utilisation of credit by oil companies because
of the rise in international oil prices during the
quarter. A noticeable aspect of the composition
of external debt was that the stock of external
commercial borrowings recorded a marginal
decline due to higher repayments during the
quarter (Table III.6).
Table III.6: India’s External Debt |
(US$ billion) |
Item |
End-Mar 2011 (PR) |
End-Jun 2011 (PR) |
End-Mar 2012 (PR) |
End-Jun 2012 (QE) |
Per cent
Variation
(5) over (4) |
1 |
2 |
3 |
4 |
5 |
6 |
1. Multilateral |
48.5 |
49.4 |
50.5 |
49.8 |
-1.4 |
2. Bilateral |
25.7 |
26.2 |
26.7 |
27.2 |
1.9 |
3. IMF |
6.3 |
6.4 |
6.2 |
6.0 |
-3.2 |
4. Trade Credit (above 1 year) |
18.6 |
18.7 |
19.0 |
19.1 |
0.6 |
5. ECBs |
88.6 |
92.7 |
105.2 |
104.8 |
-0.4 |
6. NRI Deposits |
51.7 |
52.9 |
58.6 |
60.9 |
3.9 |
7. Rupee Debt |
1.6 |
1.6 |
1.4 |
1.2 |
-14.3 |
8. Long-term (1 to 7) |
240.9 |
247.7 |
267.5 |
269.1 |
0.6 |
9. Short-term |
65.0 |
68.5 |
78.2 |
80.5 |
2.9 |
Total (8+9) |
305.9 |
316.2 |
345.7 |
349.5 |
1.1 |
PR: Partially Revised. QE: Quick Estimates. |
III.14 The CAD during Q1 of 2012-13 was
largely financed through debt flows, with
continued uncertainty in the global economy
affecting the quantum of equity flows. However,
the magnitude of increase in external debt was
lower than that of the preceding quarter largely
due to valuation gains of US$ 7.9 billion during
Q1 resulting from appreciation of the US dollar
against the Indian rupee and other international
currencies. Thus, excluding the valuation gains,
the stock of external debt as at end-June 2012
would have increased by 11.8 billion.
External vulnerability indicators witnessed
deterioration, but remain comparable with
peers
III.15 There was some deterioration in the
major indicators considered for assessing the
vulnerability of the external sector in Q1 of
2012-13 (Table III.7). Key indicators of external
sector vulnerability, such as debt-GDP ratio,
short-term debt as per cent to total debt as well
as to foreign exchange reserves and import
cover, deteriorated as at end-June 2012
compared to end-March 2012.
III.16 India’s NIIP as represented by net
international liabilities, improved to US$ 220.3 billion at end-June 2012 from US$ 244.2 billion
at end-March 2012. Accordingly, the NIIP/GDP
ratio at end-June 2012 declined compared with
that at end-March 2012. The improvement in
NIIP was essentially on account of the valuation
changes emanating from exchange rate
movements (Table III.8).
Table III.7: External Sector Vulnerability Indicators |
(Ratios in per cent) |
Indicator |
End-Mar 2011 |
End-Mar 2012 |
End-Jun 2012 |
1 |
2 |
3 |
4 |
Ratio of Total Debt to GDP |
17.8 |
20.0 |
21.7 |
Ratio of Short-term to Total Debt (Original Maturity) |
21.2 |
22.6 |
23.0 |
Ratio of Short-term to Total Debt (Residual Maturity) |
42.2 |
42.6 |
42.9 |
Ratio of Concessional Debt to Total Debt |
15.5 |
13.9 |
13.5 |
Ratio of Reserves to Total Debt |
99.6 |
85.2 |
82.9 |
Ratio of Short-term Debt to Reserves |
21.3 |
26.6 |
27.8 |
Reserves Cover of Imports (in months) |
9.6 |
7.1 |
7.0 |
Reserves Cover of Imports and Debt Service Payments (in months) |
9.1 |
6.8 |
6.6 |
Debt-Service Ratio (Debt Service Payments to Current Receipts) |
4.3 |
6.0 |
5.9 |
External Debt (US$ billion) |
305.9 |
345.7 |
349.5 |
III.17 Historical data suggests some
improvement in the major indicators of external
vulnerability, such as foreign exchange reserves
to total debt ratio, short-term debt to foreign
exchange reserves and external debt to GDP
ratio over the past two decades (Chart III.2).
However, more recently, there has been some
deterioration in these indicators. Short-term
debt to total debt ratio has risen since 2004-05.
Moreover, in the recent years, while the ratio of
foreign exchange reserves to total debt has
declined, the ratio of short-term debt to foreign
exchange reserves has increased. These trends
are a matter of concern although foreign
exchange reserves provide a cushion.
III.18 A cross-country analysis highlights the
relatively robust position of India compared with other indebted developing countries. According
to the Global Development Finance Report,
2012, in terms of ratio of external debt to GNI
at end-2010, India’s position was the fifth lowest
among the top 20 developing debtor countries.
In terms of short-term to total external debt stock, as also foreign exchange reserves to
external debt stocks, India’s position is
comparable to other BRIC countries, except
China. Even though China’s short-term debt to
total external debt ratio is very high, its foreign
exchange reserves are also high, thus providing
adequate cover (Chart III.3).
|
Table III.8: Overall International Investment Position of India |
(US$ billion) |
Period |
Mar-11 (PR) |
Jun-11 (PR) |
Sep-11 (PR) |
Dec-11 (PR) |
Mar-12 (PR) |
Jun-12 (P) |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
Net IIP |
-203.6 |
-216.1 |
-196.0 |
-204.7 |
-244.2 |
-220.3 |
Assets |
439.8 |
450.0 |
453.9 |
431.6 |
437.1 |
433.5 |
Liabilities |
643.4 |
666.1 |
649.8 |
636.2 |
681.3 |
653.9 |
Net IIP-GDP Ratio* |
-12.1 |
-12.2 |
-10.7 |
-11.1 |
-13.2 |
-12.2 |
* Based on annualised GDP. PR: Partially Revised.
P: Preliminary. |
III.19 In sum, India’s external sector faces some
sustainability issues that emanate from large
current account imbalances. Although reserves
coverage and manageable external debt provide
some comfort, macro-financial policies aimed
at lowering inflation, containing demand by
more restrained fiscal spending, improving trade
competitiveness through structural and other
policies and the direct use of trade policy
measures would be needed for medium-term
sustainability.
|