|
|
BALANCE
OF PAYMENT
Shrinking foreign trade
INDIA’s
trade deficit during the first three months of current fiscal year (2009-10)
on a balance of payments (BoP) basis
was large due to the steeper decline in the pace of exports than that
of imports The trade deficit on a BoP basis in Q1 (US$ 26.0 billion) was,
however, less than that in Q1 of 2008-09 (US$ 31.4 billion).
This is revealed in e report of the country’s central banking authority
Reserve Bank of India (RBI) on
India's Balance of Payments Developments
during the first quarter (April-June) of 2009-10.
The key features of
India’s BoP that emerged in Q1 of fiscal 2009-10 were:(i)
The decline in exports which started since October 2008 continued during
the first quarter of 2009-10. Import payments, on a BoP basis, also continued
its declining trend mainly due to lower oil import bill; (ii) Private
transfer receipts remained buoyant and increased by 9.4 per cent to
US$ 13.3 billion during Q1 of 2009-10. Exports of software services, however,
declined during Q1 of 2009-10; (iii) Despite net invisibles surplus at
US$ 20.2 billion, the large trade deficit (US$ 26.0 billion) mainly on
account of sharp decline in exports led to a current account deficit of
US$ 5.8 billion in Q1 of 2009-10 (US$ 9.0 billion during Q1
of 2008-09); (iv) With the revival in capital inflows to India, particularly
foreign investments, the capital account showed a turnaround from a negative
balance in last two quarters of 2008-09 to a positive balance of US$ 6.7
billion during Q1 of 2009-10; (v) Portfolio investment witnessed a sharp
turnaround from net outflows of US$ 2.7 billion in Q4 of 2008-09 to net
inflows of US$ 8.3 billion during Q1 of 2009-10; (vi) NRI deposits also
witnessed higher inflows reflecting the positive impact of the revisions
in the ceiling interest rate on NRI deposits; (vii) There was a marginal
increase in reserves on BoP basis (i.e., excluding valuation)
during Q1 of 2009-10. However, the foreign exchange reserves including
valuation increased by US$ 13.2 billion during Q1 of 2009-10 implying
that the increase in reserves during this period was mainly due to valuation
gains as the US dollar has depreciated against major currencies.
|
Major Items of India's Balance of Payments
(US$
million)
|
| |
(2007-08) (PR) |
(2008-09) (P) |
April-June (2008-09) (PR) |
April-June (2009-10) (P) |
| Exports |
|
175184 |
49120 |
38789 |
| Imports |
257789 |
294587 |
80545 |
64775 |
| Trade
Balance |
-91626 |
-119403 |
-31425 |
-25986 |
| Invisibles,
net |
74592 |
89587 |
22406 |
20179 |
| Current
Account Balance |
-17034 |
-29817 |
-9019 |
-5808 |
| Capital
Account* |
109198 |
9737 |
11254 |
5923 |
| Change
in Reserves#
(+ indicates increase;- indicates decrease) |
-92164 |
20080 |
-2235 |
-115 |
|
Including errors & omissions; # On BoP basis excluding valuation;
P: Preliminary, PR: Partially revised. R: revised |
|
SOURCE: Reserve Bank of India Report |
Invisibles
(i)
During Q1 of 2009-10, invisibles receipts declined marginally, while invisibles
payments recorded a positive growth (Table
2). In net terms, the invisibles balance at US$ 20.2 billion was lower
than that in the corresponding period of the previous year (US$ 22.4 billion),
though higher than that in Q4 of 2008-09 (US$ 19.3 billion).
Invisibles Receipts
(i)
Invisibles receipts registered a marginal decline of 0.7 per cent in Q1
of 2009-10 (as against a higher growth of 30.3 per cent in Q1 of 2008-09)
on account of a decline in almost all categories of services except insurance
and financial services and a decline of 20.3 per cent in investment income
receipts.
(ii) Exports of software services declined by 11.5 per cent during Q1
of 2009-10 as against an increase of 37.6 per cent in Q1 of 2008-09.
According to the NASSCOM, software services exports are projected to grow
by 4 to 7 per cent to US$ 48 to 50 billion during the financial year 2009-10.
(iii) Travel receipts at US$ 2.3 billion during Q1 of 2009-10 declined
by 8.7 per cent as against an increase of 19.9 per cent in Q1 of 2008-09
reflecting a slowdown in tourist arrivals in the country since November
2008. According to the data released by the Ministry of Tourism, foreign
tourist arrivals declined by 1.8 per cent in Q1 of 2009-10.
Invisibles Payments
(i) Invisibles payments
recorded a positive growth of 11.9 per cent in Q1 of 2009-10 (13.5 per
cent in Q1 of 2008-09) mainly due to growth in payments under services
and income account. In the services account, however, payments under travel,
transportation, G.N.I.E. and software services recorded a negative growth
in Q1 of 2009-10.
(ii) Investment income payments (include mainly the interest payments
on commercial borrowings, external assistance and non-resident deposits,
and reinvested earnings of the foreign direct investment (FDI) enterprises
operating in India) increased marginally to US$ 4.4 billion during Q1
of 2009-10 (US$ 4.1 billion in Q1 of 2008-09) mainly due to increased
reinvested earnings of FDI companies in India (Table 8).
Invisibles Balance
(iii) A combined effect
of decline in invisibles receipts and increase in invisibles payments
led to marginally lower net invisibles (invisibles receipts minus invisibles
payments) at US$ 20.2 billion in Q1 of 2009-10 than that in the
corresponding period of the previous year (US$ 22.4 billion) (Table 3).
At this level, however, the invisibles surplus financed about 77.7 per
cent of trade deficit during Q1 of 2009-10 (71.3 per cent during Q1 of
2008-09).
Current Account Deficit
i)
Despite net invisibles surplus, the large trade deficit mainly on account
of sharp decline in exports led to a current account deficit of US$ 5.8
billion in Q1 of 2009-10 (US$ 9.0 billion during Q1 of 2008-09).
Capital Account and Reserves
i)
The gross capital inflows to India revived during Q1 of 2009-10 as compared
to the last two quarters of 2008-09 manifesting confidence in India’s
long-term growth prospects. The gross inflows were, however, at US$ 78.5
billion as compared to US$ 90.9 billion in Q1 of 2008-09 mainly led by
inflows under FIIs, FDI and NRI deposits. Gross capital outflows during
Q1 of 2009-10 stood lower at US$ 71.8 billion as against US$ 79.7 billion
in Q1 of 2008-09.
(ii) With the revival in capital inflows to India, particularly foreign
investments, the capital account showed a turnaround from a negative balance
in last two quarters of 2008-09 to a positive balance of US$ 6.7 billion
during Q1 of 2009-10 (US$ 11.1 billion in Q1 of 2008-09).
(iv) Net FDI inflows (net inward FDI minus net outward FDI) amounted to
US$ 6.8 billion in Q1 of 2009-10 (US$ 9.0 billion in Q1 of 2008-09). Net
inward FDI stood at US$ 9.5 billion during Q1 of 2009-10 (US$ 11.9 billion
in Q1 of 2008-09). Net outward FDI stood at US$ 2.6 billion in Q1 of 2009-10
as compared with US$ 2.9 billion in Q1 of 2008-09.
(v) During Q1 of 2009-10, FDI to India was channeled mainly into manufacturing
sector (19.2 per cent), real estate activities (15.6 per cent), financial
services (15.4 per cent), construction (12.2 per cent) and business services
(11.7 per cent). Mauritius continued to be the major source of FDI during
Q1 of 2009-10 with a share of 48.9 per cent followed by USA at 12.8 per
cent.
(vi) Portfolio investment primarily comprising foreign institutional investors’
(FIIs) investments and American Depository Receipts (ADRs)/Global Depository
Receipts (GDRs) witnessed a sharp turnaround from net outflows of US$
2.7 billion in Q4 of 2008-09 to net inflows of US$ 8.3 billion during
Q1 of 2009-10. During 2009-10, the sharp increase in FII inflows could
be attributed to the recovery of domestic stock market in line with international
stock markets, better corporate performance, political stability and comparatively
better growth prospects.
(vii) The tightness in liquidity in the overseas markets continued during
Q1 of 2009-10. The approvals of external commercial borrowings (ECBs)
were very low in the first two months of 2009-10, however, it recovered
during June 2009. In addition, repayments of ECBs were higher at US$ 2.1
billion during Q1 of 2009-10 (US$ 1.1 billion during Q1 of 2008-09) resulting
in net outflows of US$ 0.4 billion under ECBs (inflows of US$ 1.5 billion
in Q1 of 2008-09).
(viii) 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).
(ix) 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.
(x) 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
(i) The decline in exports
which started since October 2008 continued during the first quarter of
2009-10. On a BoP basis, India’s merchandise exports recorded a decline
of 21.0 per cent in Q1 of 2009-10 as against an increase of 43.0 per cent
in Q1 of 2008-09.
(ii) As per the data released by the Directorate General of Commercial
Intelligence and Statistics (DGCI&S), merchandise exports declined
by 26.4 per cent in Q1 of 2009-10 as against a higher growth of 37.4 per
cent in Q1 of 2008-09, reflecting fall in demand worldwide due to the
global economic crisis.
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INDIA’s
cumulative value of exports for the period April-
August, 2009 was US$ 64129 million (Rs. 311715 crore) as against
US $ 92959 million (Rs. 391841 crore) registering a negative growth
of 31 per cent in Dollar terms and 20.4 per cent in Rupee terms
over the same period last year. Cumulative value of imports for
the period April- August 2009 was US$ 102300 million (Rs. 497108
crore) as against US$ 153691 million (Rs. 648041 crore) registering
a negative growth of 33.4 per cent in Dollar terms and 23.3 per
cent in Rupee terms over the same period last year.
Oil imports during April- August, 2009 were valued at US$ 28275
million which was 47.4 per cent lower than the oil imports of US
$ 53742 million in the corresponding period last year. Non-oil imports
during April- August, 2009 were valued at US$ 74024 million which
was 25.9 per cent lower than the level of such imports valued at
US$99949 million in April- August, 2008.
The
trade deficit for April- August, 2009 was estimated at US $38171
million which was lower than the deficit of US $ 60732 million during
April-August, 2008.
|
EXPORTS
& IMPORTS
(April-August, FY 2009-10)
|
|
|
In $ Million |
In Rs Crore |
|
Exports including re-exports |
|
2008-09 |
92959 |
391841 |
|
2009-10 |
64129 |
311715 |
|
Growth 2009-10/2008-2009 (percent) |
-31.0 |
-20.4 |
|
Imports |
|
2008-09 |
153691 |
648041 |
|
2009-10 |
102300 |
497108 |
|
Growth 2009-10/2008-2009 (percent) |
-33.4 |
-23.3 |
|
Trade Balance |
|
2008-09 |
-60732 |
-256200 |
|
2009-10 |
-38171 |
-185393 |
|
Figures for 2008-09 and
2009-10 are provisional
|
|
The
trade deficit for April- June, 2009 was estimated at $
15504
million which was lower than the deficit at $
28642 million
during April- June, 2008.
Source:
Federal Ministry of Commerce, Government of India
|
Imports
(i)
Import payments, on a BoP basis, also continued its declining trend. Imports
declined by 19.6 per cent in Q1 of 2009-10 as against a positive growth
of 42.9 per cent in Q1 of 2008-09.
(ii) According to the data released by the DGCI&S, the decline in
imports is mainly attributed to the sharp fall in oil import payments
due to lower crude oil prices during Q1 of 2009-10 (US$ 63.9 per barrel
in Q1 of 2009-10 as against US$ 119 per barrel in Q1 of 2008-09). POL
imports recorded a sharp decline of 56.9 per cent during Q1 of 2009-10
as against a sharp increase of 74.2 per cent during Q1 of 2008-09. As
per the data released by the Ministry of Petroleum & Natural Gas,
Government of India, POL imports showed a decline of 45.1 per cent during
Q1 of 2009-10 despite a quantity growth of 10 per cent mainly due to lower
crude oil price.
(iii)
According to the DGCI&S data, out of the total decline in imports
of US$ 26.7 billion in Q1 of 2009-10 over the corresponding previous quarter,
oil imports declined by US$ 16.8 billion (share of 63.1 per cent in the
decline in total imports during Q1 of 2009-10 as against 59.8 per cent
share in total increase in imports during Q1 of 2008-09), while non-oil
imports decreased by US$ 9.8 billion (share of 36.9 per cent in the decline
in total imports during Q1 of 2009-10 as against 40.2 per cent share
in total increase in imports during Q1 of 2008-09).
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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
(i) The increase in foreign exchange reserves on a BoP basis
(i.e., excluding valuation) was US$ 115 million in Q1 of 2009-10
(as against an accretion to reserves of US$ 2,235 million in Q1 of 2008-09)
(Table 12 & Chart
5). However, the foreign exchange reserves including valuation increased
by US$ 13.2 billion during Q1 of 2009-10 implying that the increase in
reserves during this period was mainly due to valuation gains as the US
dollar has depreciated against major currencies. [A Press Release on the
sources of variation in foreign exchange reserves is separately issued].
(ii) At the end of June 2009, outstanding foreign exchange reserves stood
at US$ 265.1 billion
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* India's fiscal year is from April to
March
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