Preliminary data on India’s balance of payments (BoP) for the first quarter (Q1), i.e., April-June, of the financial year 2014-15, are now available and presented in Statements I and II. While Statement I presents BoP data in BPM6 format, Statement II provides the same as per the old format.

Developments in India’s BoP during April-June 2014

• India’s current account deficit (CAD) narrowed sharply to US$ 7.8 billion (1.7 per cent of GDP) in Q1 of 2014-15 from US$ 21.8 billion (4.8 per cent of GDP) in Q1 of 2013-14. However, it was higher than US$ 1.2 billion (0.2 per cent of GDP) in Q4 of 2013-14. The lower CAD was primarily on account of a contraction in the trade deficit contributed by both a rise in exports and a decline in imports.

• On a BoP basis, merchandise exports at US$ 81.7 billion increased by 10.6 per cent in Q1 of 2014-15 as against a decline of 1.5 per cent in Q1 of 2013-14.

• On the other hand, merchandise imports (on BoP basis) at US$ 116.4 billion moderated by 6.5 per cent in Q1 of 2014-15 as against an increase of 4.7 per cent in Q1 of 2013-14. Decline in imports was primarily led by a steep decline of 57.2 per cent in gold imports, which amounted to US$ 7.0 billion, significantly lower than US$ 16.5 billion in Q1 of 2013-14. Notably, non-gold imports recorded a modest rise of 1.3 per cent as against decline of 0.6 per cent in corresponding quarter of last year reflecting some revival in economic activity.

• As a result, the merchandise trade deficit (BoP basis) contracted by about 31.4 per cent to US$ 34.6 billion in Q1 of 2014-15 from US$ 50.5 billion in the corresponding quarter a year ago.

• Net services receipts improved marginally in Q1 of 2014-15 on account of higher exports of services. Net services at US$ 17.1 billion recorded a growth of 1.2 per cent in Q1 of 2014-15.

• Net outflow on account of primary income (profit, dividend and interest) amounting to US$ 6.7 billion in Q1 of 2014-15 was higher than that of US$ 4.8 billion in the Q1 of 2013-14 as well as in the preceding quarter (US$ 6.4 billion). In Q1 of 2014-15, gross private transfer receipts at US$ 17.5 billion, however, were marginally lower as compared with the corresponding quarter of 2013-14. In fact, in Q1 of 2013-14, private transfers had shown a significant increase of around 6 per cent over the preceding quarter, possibly responding positively to the rupee depreciation.

• In the financial account, on net basis, both foreign direct investment and portfolio investment recorded inflows in Q1 of 2014-15. While net inflow on account of portfolio investment was US$ 12.4 billion as against an outflow of US$ 0.2 billion in Q1 of 2013-14, net FDI inflow was substantially higher at US$ 8.2 billion (US$ 6.5 billion in Q1 of 2013-14).

• ‘Loans’(net) availed by deposit taking corporations (commercial banks) witnessed an outflow of US$ 2.6 billion in Q1 of 2014-15 owing to higher repayments of overseas borrowings and a build-up of their overseas foreign currency assets. Under ‘currency & deposits’, net inflows of NRI deposits amounted to US$ 2.4 billion in Q1 of 2014-15 as compared to US$ 5.5 billion in Q1 of 2013-14. The amount of loans (net) of other sectors (i.e., external commercial borrowings) at US$ 1.7 billion was much higher than US$ 0.9 billion in Q1 of 2013-14. After recording a net outflow in the three preceding quarters, net trade credits and advances recorded a net inflow of US$ 0.2 billion albeit lower than that of US$ 2.5 billion in Q1 of 2013-14.

• On a BoP basis, there was a net accretion of US$ 11.2 billion to India’s foreign exchange reserves in Q1 of 2014-15 as against a drawdown of US$ 0.3 billion in Q1 of 2013-14 (Table 1).

Alpana Killawala
Principal Chief General Manager

Press Release : 2014-2015/442