Developments in India's Balance of Payments during the Third Quarter (October-December 2010) of 2010-11

posted 13 Apr 2011, 03:35 by CA Naresh Shah

Preliminary data on India’s balance of payments (BoP) for the third quarter (Q3), i.e., October-December 2010 of the financial year 2010-11, are now available. These preliminary data and the partially revised data for the first two quarters i.e., April-June 2010 (Q1) and July-September 2010 (Q2) have been taken into account for compiling the BoP data for April-December 2010. The details of these data are set out in the standard format of BoP presentation in Statements I and II.

Major Highlights of BoP during October-December 2010 (Q3) of 2010-11

(i) On a BoP basis, exports recorded a growth of 39.8 per cent while imports registered a growth of 24.9 per cent, year-on-year, during Q3 of 2010-11.

(ii) The trade deficit in absolute terms amounted to US$ 31.6 billion, broadly the same as in the corresponding quarter of last year.

(iii) Net services recorded a growth of 49.3 per cent (as against a decline of 46.0 per cent a year ago) mainly due to strong growth in receipts led by travel, transportation, software, business and financial services.

(iv) Private transfer receipts remained buoyant at US$ 14.1 billion during the quarter.

(v) Consequently, net invisibles balance under reference showed an increase of 17.0 per cent (as against a decline of 19.0 per cent a year ago).

(vi) The current account deficit (CAD) moderated to US$ 9.7 billion compared to the corresponding quarter of last year mainly due to recovery in the invisibles surplus.

(vii) The capital account surplus increased marginally over the corresponding quarter of last year mainly due to higher net inflows under FII investments, external assistance, external commercial borrowings (ECBs) and banking capital.

(viii) With capital account surplus being higher than the current account deficit, there was a net accretion to foreign exchange reserves of US$ 4.0 billion during the quarter.

Major Highlights of BoP during April-December 2010

(i) Despite improvement in net invisibles surplus, the current account deficit widened during April-December 2010 mainly due to higher trade deficit as compared to the corresponding period of last year. At this level, the CAD works out to 3.1 per cent of GDP during April-December 2010.

(ii) Net capital inflows increased significantly driven by higher net inflows under FII investments, external assistance, short-term trade credits, ECBs and banking capital.

(iii) Although net capital inflows increased significantly, accretion to reserves during April-December 2010 was marginally lower mainly due to widening of the current account deficit over April-December 2009.

1. Balance of Payments for October-December 2010 (Q3) of 2010-11

The major items of the BoP for the third quarter (Q3) of 2010-11 are set out below in Table 1.