India's Balance of Payments (2008-09)

India's foreign exchange reserves stand at  $278.193 billion as on Mar. 19, 2010

 

 

BALANCE OF PAYMENT

Shrinking foreign trade

INDIA’s trade deficit during the first nine months of fiscal 2009-10 on a balance of payments (BoP) basis was lower at US$ 89.51 bn compared with US$ 98.44 bn during the same period in fiscal 2008-09. The trade deficit on a BoP basis in Q3 (US$ 30.72 billion) was, however, less than that in Q3 of 2008-09 (US$ 34.04 billion). This is revealed in e report (India's Balance of Payments Developments during the first quarter (October-December) of 2009-10) of the country’s central banking authority Reserve Bank of India (RBI).

The key features of India’s BoP that emerged in Q3 of fiscal 2009-10 were:
(i) Exports recorded a growth of 13.2 per cent during Q3 of 2009-10 over the corresponding quarter of the previous year, after consecutive declines in the last four quarters.(ii) Imports registered a growth of 2.6 per cent in Q3 of 2009-10 after recording consecutive declines in the last three quarters.(iii) Private transfer receipts remained robust during Q3 of 2009-10.(iv) Despite low trade deficit, the current account deficit was higher at US$ 12.0 billion during Q3 of 2009-10 mainly due to lower invisibles surplus.(v) The current account deficit during April-December 2009 was higher at US$ 30.3 billion as compared to US$ 27.5 billion during April-December 2008.(vi) Surplus in capital account increased sharply to US$ 43.2 billion during April-December 2009 (US$ 5.8 billion during April-December 2008) mainly on account of large inflows under FDI, Portfolio investment, NRI deposits and commercial loans.(vii) As the surplus in capital account exceeded the current account deficit, there was a net accretion to foreign exchange reserves of US$ 11.3 billion during April-December 2009 (as against a drawdown of US$ 20.4 billion during April-December 2008).


Major Items of India's Balance of Payments
(US$ million)
 

  (2007-08) (PR) (2008-09) (P) April-December (2008-09) (PR) April-December (2009-10) (P)

Exports

166163

175184

150520

124473

Imports

257789

294587

248967

213988

Trade Balance

-91626

-119403

-98446

-89515

Invisibles, net

74592

89587

70931

59185

Current Account Balance

-17034

-29817

-27516

-30330

Capital Account*

109198

9737

7136

41630

Change in Reserves#
(+ indicates increase;- indicates decrease)

-92164

20080

20380

-11330

Including errors & omissions; # On BoP basis excluding valuation; P: Preliminary, PR: Partially revised. R: revised
SOURCE: Reserve Bank of India Report

Invisibles

The decline in invisibles receipts, which started in the Q4 of 2008-09, continued during Q3 of 2009-10. Invisibles receipts registered a decline of 3.1 per cent during the quarter (as against an increase of 5.4 per cent in Q3 of 2008-09) mainly on account of decline in business, communication and financial services, and investment income receipts. Although, software exports recorded a robust growth of 15.3 per cent, services exports as a whole witnessed a decline of 12.3 per cent during the quarter as against an increase of 11.8 per cent during the corresponding quarter of 2008-09.

Invisible receipts recorded a decline of 7.7 per cent during April-December 2009, as compared with an increase of 22.2 per cent in the corresponding period of the previous year, mainly due to the lower receipts under almost all components of services coupled with lower investment income receipts.

Invisibles Payments

Invisibles payments recorded a growth of 12.9 per cent during Q3 of 2009-10, as compared with a low growth of 2.4 per cent in Q3 of 2008-09, mainly led by increase in payments under almost all components of services.

Invisibles payments witnessed a positive growth of 3.7 per cent in April-December 2009 (10.4 per cent in April-December 2008) mainly supported by higher business, communication and financial services, and increase in payments under investment income account.

Invisibles Balance

Size of invisibles surplus in Q3 of 2009-10 was, however, lower than Q3 of preceding year. Therefore, despite low trade deficit, the current account deficit was higher at US$ 12.0 billion in Q3 of 2009-10 (US$ 11.7 billion in Q3 of 2008-09).

Net invisibles (invisibles receipts minus invisibles payments) stood at US$ 59.2 billion during April-December 2009 as compared with US$ 70.9 billion during April-December 2008. At this level, the invisibles surplus financed 66.1 per cent of trade deficit during April-December 2009 as against 72.0 per cent during April-December 2008.

Current Account Deficit

Net invisibles (invisibles receipts minus invisibles payments) stood at US$ 59.2 billion during April-December 2009 as compared with US$ 70.9 billion during April-December 2008. At this level, the invisibles surplus financed 66.1 per cent of trade deficit during April-December 2009 as against 72.0 per cent during April-December 2008.

Net capital flows at US$ 43.2 billion in April-December 2009 was much higher as compared with US$ 5.8 billion in April-December 2008 mainly due to larger inflows under FDI, portfolio investments and NRI deposits

Due to lower outward FDI, the net FDI (inward FDI minus outward FDI) was higher at US$ 16.5 billion in April-December 2009 as compared with US$ 14.3 billion in April-December 2008.

Portfolio investment witnessed large net inflows of US$ 23.6 billion during April-December 2009 as against a net outflow of US$ 11.3 billion in April-December 2008 due to large net FII inflows of US$ 20.5 billion.

Net external commercial borrowings (ECBs) inflow slowed down to US$ 2.3 billion in April-December 2009 (US$ 6.9 billion in April-December 2008) mainly due to increased repayments.

The increase in foreign exchange reserves on BoP basis (i.e., excluding valuation) was US$ 11.3 billion in April-December 2009 (as against a sharp decline in reserves of US$ 20.4 billion in April-December 2008). [A Press Release on the Sources of Variation in Foreign Exchange Reserves is separately issued].

The gross disbursements of short-term trade credit was US$ 10.1 billion during Q1 of 2009-10 almost same in Q1 of 2008-09. The repayments of short-term trade credits, however, were very high at US$ 13.2 billion in Q1 of 2009-10 (US$ 7.8 billion in Q1 of 2008-09). As a result, there were net outflows of US$ 3.1 billion under short-term trade credit during Q1 of 2009-10 (inflows of US$ 2.4 billion in Q1 of 2008-09)

Banking capital mainly consists of foreign assets and liabilities of commercial banks. NRI deposits constitute major part of the foreign liabilities. Banking capital (net), including NRI deposits, were negative at US$ 3.4 billion during Q1 of 2009-10 as against a positive net inflow of US$ 2.7 billion during Q1 of 2008-09. Among the components of banking capital, NRI deposits witnessed higher inflows of US$ 1.8 billion in Q1 of 2009-10 (net inflows of US$ 0.8 billion in Q1 of 2008-09) reflecting the positive impact of the revisions in the ceiling interest rate on NRI deposits.

Other capital includes leads and lags in exports, funds held abroad, advances received pending for issue of shares under FDI and other capital not included elsewhere (n.i.e.). Other capital recorded net outflows of US$ 1.6 billion in Q1 of 2009-10.

Balance of Payments (BoP)

Merchandise Trade

Exports


On a BoP basis, India’s merchandise exports posted a decline of 17.3 per cent in April-December 2009 (as against a high growth of 27.5 per cent in the corresponding period of the previous year).


INDIA's cumulative value of exports for the first 11 months of fiscal 2009-10 (April-2009 to February-2010) stood at  US $ 152983 million (Rs 727345 crore) as against US $ 172379 million (Rs. 774585 crore) registering a negative growth of 11.3 per cent in Dollar terms and 6.1 per cent in Rupee terms over the same period last year. Country's cumulative value of imports for the period April, 2009- February, 2010 was US $ 248401 million (Rs. 1180124 crore) as against US $ 287099 million (Rs. 1289412 crore) registering a negative growth of 13.5 per cent in Dollar terms and 8.5 per cent in Rupee terms over the same period last year.   

Oil imports during this 11-month period were valued at US$ 73230 million which was 18.2 per cent lower than the oil imports of US $ 89492 million in the corresponding period last year. Non-oil imports during April, 2009- February, 2010 were valued at US$ 175171 million which was 11.4 per cent lower than the level of such imports valued at US$ 197607 million in April 2008- February, 2009.                           
      

 
EXPORTS & IMPORTS (April-February, FY 2009-10)
 

 

In $ Million

In Rs Crore

Exports including re-exports

2008-09

172379

774585

2009-10

152983

727345

Growth 2009-10/2008-2009 (percent)

-11.3

-6.1

Imports

2008-09

287099

1289412

2009-10

248401

1180124

Growth 2009-10/2008-2009 (percent)

-13.5

-8.5

Trade Balance

2008-09

-114721

-514827

2009-10

-95418

-452779


Figures for 2008-09 are the latest revised whereas figures for 2009-10 are provisional
 

The trade deficit for April 2009- February, 2010 was estimated at US $ 95418 million which was lower than the deficit of US $ 114721 million during April 2008 -February, 2009.

Source: Federal Ministry of Commerce, Government of India
 

Imports

Import payments, on a BoP basis, also remained lower recording a decline of 14.0 per cent during April-December 2009 as compared with a high growth of 35.6 per cent in the corresponding period of the previous year.

According to the DGCI&S data, exports declined by 17.3 per cent, and imports growth was negative at 22.0 per cent led by the decline in both oil imports (a decline of 29.7 per cent) and non-oil imports (a decline of 18.4 per cent) during April-December 2009.

On a BoP basis, the merchandise trade deficit decreased to US$ 89.5 billion during April-December 2009 from US$ 98.4 billion in April-December 2008 mainly on account of both lower oil and non-oil import payments


Inflows & Outflows from NRI Deposits and Local Withdrawals
(In $ million)

 

Inflows Outflows Local Withdrawals
2006-07 (R) 19914 15593 13208
2007-08 (PR) 29401 29222 18919
2008-09 (P) 37,089 32,799 20,617
2008-09 (Q1) (PR) 9063 8249 5157
2009-10 (Q1) (P) 11172 9354 5568


P: Preliminary, PR: Partially revised. R: revised

SOURCE: Reserve Bank of India report India's Balance of Payments Developments during the First Quarter (April-June 2009) of 2009-10
 

 Variation in Reserves

During April-December 2009, there was an accretion to foreign exchange reserves mainly on account of valuation gains. Also, inflows under foreign investments, Non-Resident Indian deposits and short-term trade credits have contributed significantly to the increase in foreign exchange reserves during April-December 2009.

On balance of payments basis (i.e., excluding valuation effects), the foreign exchange reserves increased by US$ 11,300 million during April-December 2009 as against a decline of US$ 20,380 million during April-December 2008. The valuation gains, reflecting the depreciation of the US dollar against the major currencies, accounted for US$ 20,185 million during April-December 2009 as compared with a valuation loss of US$ 33,375 million during April-December 2008. Accordingly, valuation gains during April-December 2009 accounted for 64.1 per cent of the total increase in foreign exchange reserves.

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*
India's fiscal year is from April to March

April 2, 2010

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