Developments in India’s Balance of Payments during the First Quarter (April-June) of 2016-17

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Developments in India’s Balance of Payments during the First Quarter (April-June) of 2016-17

Preliminary data on India’s balance of payments (BoP) for the first quarter (Q1) i.e., April-June, 2016-17 are presented in Statements I (BPM6 format) and II (old format).

Key Features

The current account deficit (CAD) narrowed to US$ 0.3 billion (0.1 per cent of GDP) in Q1 of 2016-17, significantly lower than US$ 6.1 billion (1.2 per cent of GDP) in Q1 of 2015-16 (Table 1).
The contraction in the CAD was primarily on account of a lower trade deficit (US$ 23.8 billion) than in Q1 of last year (US$ 34.2 billion) and in the preceding quarter (US$ 24.8 billion).
On a BoP basis, merchandise imports declined sharply (by 11.5 per cent) vis-à-vis merchandise exports (which declined by 2.1 per cent), leading to a lower trade deficit in Q1 of 2016-17.
Net services receipts declined on a y-o-y basis, largely due to a fall in net earnings on account of travel, financial services and other business services.
Net payment on account of primary income (dividend, interest and profit) increased marginally in Q1 of 2016-17 from its level a year ago.
Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to US$ 15.2 billion, declining from their level in the preceding quarter as well as from a year ago.
Net foreign direct investment moderated to US$ 4.1 billion in Q1 of 2016-17 from US$ 10.0 billion in Q1 of 2015-16 and US$ 8.8 billion in the preceding quarter i.e., Q4 of 2015-16.
On the other hand, portfolio investment, recorded a net inflow of US$ 2.1 billion in Q1 of 2016-17 as against a marginal outflow in the corresponding period of last year and an outflow of US$ 1.5 billion in the preceding quarter, primarily reflecting net inflow in the equity component.
Accretion to non-resident Indian (NRI) deposits at US$ 1.4 billion moderated in Q1 of 2016-17 from their level in Q1 last year as well as in the preceding quarter.
Higher repayments under external commercial borrowings led to a net outflow under loans to India in Q1 of 2016-17 as against net borrowings in the same period last year.
Foreign exchange reserves (on a BoP basis) increased by US$ 7.0 billion in Q1 of 2016-17 as compared with an accretion of US$ 11.4 billion in Q1 of 2015-16 and US$ 3.3 billion in the preceding quarter.

Table 1: Major Items of India's Balance of Payments
(US$ Billion)
	Apr-Jun 2016 (P)			Apr-Jun 2015 (PR)
	Credit	Debit	Net	Credit	Debit	Net
A. Current Account	125.2	125.5	-0.3	126.9	133.0	-6.1
1. Goods	66.6	90.5	-23.8	68.0	102.2	-34.2
Of which:
POL	7.0	19.0	-12.0	8.3	24.7	-16.4
2. Services	39.5	23.8	15.8	38.3	20.5	17.8
3. Primary Income	3.8	10.0	-6.2	3.3	9.2	-5.9
4. Secondary Income	15.3	1.3	14.0	17.3	1.1	16.2
B. Capital Account and Financial Account	129.2	129.0	0.1	141.1	133.9	7.2
Of which:
Change in Reserve (Increase (-)/Decrease (+))	0.0	7.0	-7.0	0.0	11.4	-11.4
C. Errors & Omissions (-) (A+B)	0.2	0.0	0.2	0.0	1.1	-1.1
P: Preliminary; PR: Partially Revised
Note: Total of subcomponents may not tally with aggregate due to rounding off.