Preliminary data on India’s balance of payments (BoP) for the third quarter (Q3) i.e., October-December of the financial year 2014-15 are presented in Statements I (BPM6 format) and II (old format).

Key Features of India’s BoP in Q3 2014-15

• On a quarter-over-quarter (q-o-q) basis, India’s current account deficit (CAD) narrowed to US$ 8.2 billion (1.6 per cent of GDP) in Q3 of 2014-15 from US$ 10.1 billion (2.0 per cent of GDP) in Q2; on a year-on-year (y-o-y) basis, however, the CAD doubled (from US$ 4.2 billion or 0.9 per cent of GDP in Q3 of 2013-14).

• The merchandise trade deficit (US$ 39.2 billion during Q3 2014-15) widened on a q-o-q basis on account of a larger decline in merchandise exports (7.3 per cent) than in merchandise imports (4.5 per cent); in terms of y-o-y changes too, the trade deficit in Q3 2014-15 widened due to a decline in exports (1.0 per cent), while imports increased (4.5 per cent).

• Thus, the reduction in the CAD in Q3 2014-15 was primarily on account of net exports of services which picked up in q-o-q terms on the back of an improvement in net earnings through travel and software services, and lower net outflows under primary income (profit, dividend and interest).

• Gross private transfer receipts, representing remittances by Indians employed overseas, amounted to US $ 17.5 billion and provided sustained support to the BoP with a share of 12.6 per cent of current receipts, broadly the same level as in the preceding quarter and a year ago.

• In the financial account, net inflows of foreign direct and portfolio investment were somewhat lower on a q-o-q basis, though net loans availed by banks increased by US$ 6.6 billion mainly on account of inward repatriations of assets held abroad by banks; on a y-o-y basis, the level of net financial flows was broadly sustained – notwithstanding the inflows of US$ 21.4 billion garnered in Q3 of 2013-14 under the non-resident deposit schemes – with larger equity inflows relative to loans.

• On a BoP basis, there was a net accretion of US$ 13.2 billion to India’s foreign exchange reserves in Q3 of 2014-15, almost double the accretion in the preceding quarter, but lower than in Q3 of 2013-14 which was bolstered by special non-resident and banks’ overseas borrowings (Table 1).

BoP during April-December 2014

• On a cumulative basis, the overall BoP shows considerable improvement on a y-o-y basis on the back of a higher growth in merchandise exports and a marginal rise in merchandise imports, with a sizable increase in net financial flows financing the CAD and enabling a large build-up of reserves.

• India’s trade deficit narrowed to US$ 112.5 billion in April-December 2014 from US$ 116.9 billion in April-December 2013. Supported by a modest rise in net services receipts, the CAD tracked the trade deficit and shrank to US$ 26.2 billion in April-December 2014 (1.7 per cent of GDP) from US$ 31.1 billion in April-December 2013 (2.3 per cent of GDP).

• Net inflows under the capital and financial account (excluding change in foreign exchange reserves) rose to US$ 61.7 billion in April-December 2014 from US$ 39.6 billion in April-December 2013.

• There was an accretion to India’s foreign exchange reserves to the tune of US$ 31.3 billion in April-December 2014 as compared with US$ 8.4 billion in April-December 2013.

• At the end of December, the level of foreign exchange reserves stood at US$ 320.6 billion.

Alpana Killawala
Principal Chief General Manager

Press Release : 2014-2015/1894