Preliminary data on India’s balance of payments (BoP) for the first quarter (Q1), i.e., April-June 2012 of the financial year 2012-13, are now available. The details of these data, as per the revised format of BoP presentation provided in IMF's BPM6, are set out in Statement I. These data as per the old format are also given in Statement II. Highlights of BoP during April-June 2012 During Q1 of 2012-13, a moderation in trade deficit due to sharper decline in imports as compared with exports coupled with improvements in secondary income, led to decline in current account deficit (CAD) in absolute terms as compared with Q1 of the previous year. However, as a proportion of GDP it rose to 3.9 per cent as compared with 3.8 per cent in Q1 of the previous year. It reflected the fall in the growth of GDP and rupee depreciation of about 17 per cent against US dollar over the corresponding quarter.
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On a BoP basis, goods exports recorded a decline of 2.6 per cent while imports registered a sharper decline of 3.6 per cent during Q1 of 2012-13.
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In absolute terms, the trade deficit on BoP basis amounted to US$ 42.5 billion, which was lower than the corresponding quarter of the previous year (US$ 44.9 billion). However, as a percentage of GDP, trade deficit widened to 10.0 per cent during the quarter as compared with 9.8 per cent in Q1 of previous year.
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Net exports of services witnessed a decline of 13.0 per cent during Q1 of 2012-13 over Q1 of 2011-12 mainly due to lower growth in receipts led by ‘transportation’, ‘travel’, ‘construction’, ‘insurance & pension services’ and ‘other business services’.
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While net secondary income (private transfers) receipts remained buoyant at US$ 16.8 billion, primary income account (investment income) continued to show a net outflow.
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Consequently, the CAD at US$ 16.4 billion was lower in Q1 of 2012-13 than the corresponding quarter of the previous year (US$ 17.4 billion). However, as a proportion to GDP, CAD stood at 3.9 per cent as compared with 3.8 per cent (revised) in the corresponding quarter of previous year.
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Net inflows under capital and financial account witnessed a decline primarily on account of moderation in foreign direct investment (FDI) inflows and loans by banks and non-banks.
- There was a net accretion to foreign exchange reserves of US$ 0.5 billion during Q1 of 2012-13 (excluding valuation).
Balance of Payments for April-June 2012 (Q1) of 2012-13 The major items of the BoP for the first quarter (Q1) of 2012-13 are set out below in Table 1. Goods Trade
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On a BoP basis, growth in merchandise exports (y-o-y), declined by 2.6 per cent during Q1 of 2012-13 as against a growth of 42.7 per cent in the same quarter of previous year.
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Growth in merchandise imports on BoP basis declined by 3.6 per cent from 41.8 per cent in Q1 of 2011-12 as imports of precious metal and POL declined and there has been moderation in the non-oil non-gold imports. The growth of non-oil non-gold segment of imports decelerated to 0.3 per cent as compared with a growth of 16.2 per cent a year ago. Gold & silver imports declined sharply by 47.5 per cent as against a growth of 123.1 per cent in the last year. Oil imports during this period marginally declined by 0.1 per cent owing to softening of oil prices, as against an increase of 52.5 per cent during the same period preceding year.
- While decline in non-oil non-gold imports largely reflects slowdown in economic activity, sharp decline in import of precious metal also seems to have been caused by various policy measures to discourage such imports including increase in custom duty.
Table 1 :Major items of India's Balance of Payments
|
(US$ Billion) |
|
Apr-Jun 2012 (P) |
Apr-Jun 2011 (PR) |
Jan-Mar 2012 (P) |
1. Goods exports |
76.7 |
78.8 |
80.0 |
2. Goods Imports |
119.2 |
123.7 |
131.7 |
3. Trade Balance(1-2) |
-42.5 |
-44.9 |
-51.7 |
4. Services Exports |
34.4 |
33.7 |
37.7 |
5. Services Imports |
20.2 |
17.4 |
20.0 |
6. Net Services (4-5) |
14.2 |
16.3 |
17.7 |
7. Goods & Services Balances (3+6) |
-28.3 |
-28.6 |
-34.0 |
8. Primary Income, Net (Compensation of employees and Investment Income) |
-4.9 |
-3.6 |
-4.6 |
9. Secondary Income, Net ( Private Transfers) |
16.8 |
14.8 |
16.9 |
10. Net Income (8+9) |
11.9 |
11.2 |
12.3 |
11. Current Account Balance (7+10) |
-16.4 |
-17.4 |
-21.7 |
12. Capital and Financial Account Balance, Net (Excl. change in reserves) |
16.8 |
23.8 |
16.5 |
13.Change in Reserves (-)increase/(+)decrease |
-0.5 |
-5.4 |
5.7 |
14. Errors & Omissions (-)(11+12+13) |
0.1 |
-0.9 |
-0.6 |
Note: Total of subcomponents may not tally with aggregate due to rounding off.
P: Preliminary, PR: Partially Revised |
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As decline in import growth was sharper than that of export growth over the same quarter of previous year, the trade deficit declined to US$ 42.5 billion in Q1 of 2012-13 (10.0 per cent of GDP) as compared with US$ 44.9 billion (9.8 per cent of GDP) in Q1 of 2011-12, showing a y-o-y growth of (-)5.4 per cent as against of 40.2 per cent over the same quarter a year ago.
Services and Income Flows
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During the quarter, while growth in services receipts on y-o-y basis, moderated to 2.0 per cent (27.4 per cent in Q1 of 2011-12), services payments witnessed a higher growth of 15.9 per cent largely on account of surge in other business services. Consequently, net services exports during the quarter declined by 13.0 per cent to US$ 14.2 billion (US$ 16.3 billion in Q1 of 2011-12) (Table 2).
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Net outflow on account of primary income during the quarter was higher than that recorded during Q1 of 2011-12. Receipts on account of investment income including other primary income at US$ 1.4 billion recorded a decline of 24.6 per cent as compared to a decline of 27.5 per cent in the corresponding quarter mainly due to persistence of lower interest rate abroad.
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On the other hand, investment income payments increased by 14.5 per cent as against a decline of 1.8 per cent during the same period a year ago driven by higher interest payments under ECBs, short term credits and NRI deposits as India has increasingly resorted to debt flows to finance its current account deficit.
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Secondary income (on net basis), reflecting mainly the remittances from overseas Indians, at US$ 16.8 billion remained buoyant and recorded a growth of 13.8 per cent during Q1 over the corresponding quarter of 2011-12 (12.7 per cent in Q1 of 2011-12).
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On account of lower trade deficit and higher secondary income, the CAD witnessed moderation and stood at US$ 16.4 billion in Q1 of 2012-13 as compared to US$ 21.7 billion during preceding quarter (Jan-Mar 2012) and US$ 17.4 billion in Q1 of 2011-12.
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Despite moderation in CAD in absolute terms, CAD as a percentage of GDP stood higher at 3.9 per cent of GDP in Q1 of 2012-13 as compared with 3.8 per cent during the corresponding quarter of previous year mainly due to lower GDP level on account depreciation of rupee vis-à-vis US dollar. Exchange rate depreciation has accounted for about 0.7 percentage point increase in the CAD-GDP ratio during the quarter.
Table 2: Disaggregated Items of Current Account
|
(US$ Billion) |
|
Apr-Jun 2012 (P) |
Apr-Jun
2011 (PR) |
Jan-Mar
2012 (P) |
1. Goods |
-42.5 |
-44.9 |
-51.6 |
2. Services |
14.2 |
16.3 |
17.7 |
2.a Transport |
0.6 |
0.3 |
0.4 |
2.b Travel |
0.4 |
0.2 |
2.2 |
2.c Construction |
-0.04 |
0.05 |
-0.1 |
2.d Insurance and pension services |
0.3 |
0.3 |
0.3 |
2.e Financial Services |
-0.1 |
-0.5 |
-0.4 |
2.f Charges for the use of intellectual property |
-0.8 |
-0.6 |
-0.9 |
2.g Telecommunications, computer and information services |
15.5 |
14.4 |
16.7 |
2.h Personal, cultural and recreational services |
0.02 |
0.01 |
0.05 |
2.i Government goods & services |
0.0 |
-0.1 |
-0.2 |
2. j Other Business services |
-0.1 |
-0.3 |
-0.2 |
2.k Others n.i.e |
-1.4 |
2.3 |
-0.2 |
3. Primary Income |
-4.9 |
-3.6 |
-4.6 |
3.a Compensation of Employees |
0.2 |
0.2 |
0.01 |
3.b Investment Income |
-5.1 |
-3.8 |
-4.6 |
4. Secondary Income |
16.8 |
14.8 |
16.9 |
4.a Personal Transfers |
16.1 |
14.3 |
16.4 |
4.b. Other Current Transfers |
0.7 |
0.5 |
0.4 |
5. Current Account (1+2+3+4) |
-16.4 |
-17.4 |
-21.7 |
Note: Total of subcomponents may not tally with aggregate due to rounding off.
P: Preliminary, PR: Partially Revised. |
Capital Account
- Capital account which includes acquisition/disposals of non-produced non-financial goods and other capital flows showed an outflow of US$ 0.2 billion on a net basis.
Financial Account With a slowdown in the net FDI to India (inward FDI minus outward FDI), outflows under portfolio investment and decline in ‘loans to India’ by deposit taking corporations (Non-NRI Banking Capital) and by other sectors (ECBs), the net inflows under the financial account excluding change in reserves during April-June 2012 recorded a significant decline over the same period of previous year (Table 3). Net financial inflows declined to US$ 17.0 billion during Q1 of 2012-13 (US$ 24.1 billion during Q1 in previous year).
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FDI inflows to India during Q1 of 2012-13 at US$ 6.2 billion stood lower than the previous year’s level of US$ 12.4 billion. FDI flows by India also declined to US$ 2.0 billion from US$ 3.1 billion in the same period of preceding year. Thus net FDI inflows to India (inward FDI minus outward FDI) during April-June 2012 stood at US$ 4.2 billion as compared to US$ 9.3 billion during the corresponding period of previous year. Portfolio investment during the quarter recorded an outflow of US$ 2.0 billion as against an inflow of US$ 2.3 billion.
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Net loans availed by banks during Q1 of 2012-13 declined to US$ 3.0 billion from US$ 11.5 billion during the same period a year ago. Significant moderation in loans by banks was mainly on account of net repayment of overseas borrowings by banks and lower draw down of their foreign currency assets held abroad as compared with the previous year.
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Net loans availed by non-Government and non-banking sectors (net ECBs) at US$ 0.8 billion also witnessed a moderation (US$ 3.0 billion in Q1 of 2011-12) as there was decline in disbursements and increase in the repayments of ECBs. However, net inflows under short-term trade credits witnessed a surge during the period and stood at US$ 5.4 billion as compared with US$ 3.1 billion during the same period of 2011-12.
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Net inflows under ‘currency and deposits by banks’ (NRI deposits) stood higher at US$ 6.6 billion inter alia reflecting the deregulation of interest rates on rupee deposits and increase in ceiling of foreign currency deposits.
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Despite moderation in CAD, net accretion to foreign exchange reserves at US$ 0.5 billion during Q1 of 2012-13 was lower as compared with US$ 5.4 billion during the corresponding period of previous year mainly on account of sharp decline in net inflows under capital and financial account. In nominal terms (i.e., including valuation changes), foreign exchange reserves declined by US$ 4.7 billion during the quarter reflecting appreciation of US dollar against major international currencies during the quarter.
Table 3: Disaggregated Items of Financial Account |
(US$ Billion) |
|
Apr-Jun 2012 (P) |
Apr-Jun
2011 (PR) |
Jan-Mar 2012 (P) |
1. Direct Investment (net) |
4.2 |
9.3 |
1.4 |
1.a Direct Investment in India |
6.2 |
12.4 |
4.2 |
1.b Direct Investment by India |
-2.0 |
-3.1 |
-2.9 |
2. Portfolio Investment |
-2.0 |
2.3 |
13.9 |
2.a Portfolio Investment in India |
-1.7 |
2.5 |
14.1 |
2.b Portfolio Investment by India |
-0.3 |
-0.2 |
-0.2 |
3. Financial Derivatives & Employee Stock Options |
-0.5 |
- |
- |
4. Other investment |
15.3 |
12.6 |
1.4 |
4.a Other equity (ADRs/GDRs) |
0.1 |
0.3 |
0.03 |
4.b Currency and deposits |
6.5 |
1.2 |
4.6 |
Deposit-taking corporations, except the central bank (NRI Deposits) |
6.6 |
1.2 |
4.7 |
4.c Loans* |
3.8 |
14.9 |
-0.03 |
4.c.i Loans to India |
3.7 |
14.9 |
-0.02 |
Deposit-taking corporations, except the central bank |
3.0 |
11.5 |
-2.6 |
General government (External Assistance) |
-0.1 |
0.4 |
0.3 |
Other sectors (External Commercial Borrowings) |
0.8 |
3.0 |
2.3 |
4.c.ii Loans by India |
0.1 |
-0.02 |
-0.01 |
General government (External Assistance) |
-0.1 |
-0.04 |
-0.04 |
Other sectors (External Commercial Borrowings) |
0.1 |
0.02 |
0.03 |
4.d Trade credit and advances |
5.4 |
3.1 |
0.2 |
4.e Other accounts receivable/payable - other |
-0.4 |
-6.8 |
-3.3 |
5. Reserve assets |
-0.5 |
-5.4 |
5.7 |
Financial Account (1+2+3+4+5) |
16.5 |
18.7 |
22.4 |
Note: Total of sub components may not tally with aggregate due to rounding off.
*: Includes External Assistance, ECBs and Banking Capital.
P: Preliminary, PR: Partially Revised. |
External Debt for the Quarter ending June 2012 As per the existing practice, the external debt for the quarters ending March and June are compiled and released by the Reserve Bank, while the external debt for quarters ending September and December are compiled and released by the Ministry of Finance, Government of India. Accordingly, the data on external debt for the quarter ending June 2012 are being released by the Reserve Bank of India today. The same could be accessed at http://www.rbi.org.in. Ajit Prasad
Assistant General Manager Press Release : 2012-2013/534 |
