Preliminary data on India’s balance of payments (BoP) for the fourth quarter (Q4) i.e., January-March 2010 of the financial year 2009-10, are now available. Based on these preliminary data and the partially revised data for the first three quarters i.e., April-June 2009 (Q1), July-September 2009 (Q2) and October-December 2009 (Q3), the BoP data for the full year 2009-10 (April-March) have been compiled, which are set out in the standard format of BoP presentation in Statements I and II.

Major Highlights of BoP

January-March (Q4) of 2009-10

1. Exports recorded a growth of 36.2 per cent during Q4 of 2009-10 over the corresponding quarter of the previous year.

2. Imports registered a growth of 43.0 per cent in Q4 of 2009-10 over the corresponding quarter of 2008-09.

3. The trade deficit widened, reflecting higher growth in imports relative to exports.

4. After four consecutive quarters of decline, on a year-on-year basis, services receipts recorded a growth of 13.4 per cent led by software and financial services. Private transfer receipts continued to be robust during Q4 of 2009-10.

5. Net invisibles, however, declined mainly on account of relatively higher invisibles payments due to larger payments on account of business, financial, communication and transportation services.

6. The higher trade deficit combined with the lower invisibles surplus widened the current account deficit.

7. The surplus in the capital account increased mainly due to portfolio investment and short-term trade credits.

8. The overall balance was in surplus at US$ 2.1 billion, which resulted in a net accretion to foreign exchange reserves of equivalent amount.

Financial Year 2009-10 (April-March)

1. On a BoP basis, the trade deficit decreased marginally to US$ 117.3 billion (8.9 per cent of GDP) during 2009-10 from US$ 118.7 billion (9.8 per cent of GDP) a year ago.

2. The current account deficit was higher at US$ 38.4 billion (2.9 per cent of GDP) during 2009-10, as compared with US$ 28.7 billion (2.4 per cent of GDP) during 2008-09, mainly due to lower net invisibles surplus.

3. The surplus in the capital account increased sharply to US$ 53.6 billion (4.1 per cent of GDP) during the year from US$ 7.3 billion (0.6 per cent of GDP) a year ago.

4. As the surplus in the capital account exceeded the current account deficit, there was a net accretion to foreign exchange reserves of US$ 13.4 billion during 2009-10 (as against a drawdown of reserves of US$ 20.1 billion during 2008-09).

1. Balance of Payments for January-March (Q4) of 2009-10

The major items of the BoP for the fourth quarter (Q4) of 2009-10 are set out below in Table 1.

1. On a BoP basis, India’s merchandise exports recorded growth of 36.2 per cent in Q4 of 2009-10 as against a decline of 20.0 per cent in Q4 of 2008-09.

2. On a BoP basis, imports registered growth of 43.0 per cent as against a decline of 20.8 per cent during Q4 of 2008-09. 

3. The trade deficit, on a BoP basis, was higher at US$ 31.5 billion in Q4 of 2009-10 as compared with US$ 20.2 billion during Q4 of 2008-09.

4. After witnessing four consecutive quarters of decline, on year-on-year basis, invisibles receipts recorded a growth of 15.4 per cent during Q4 of 2009-10 (as against a decline of 18.3 per cent during Q4 of 2008-09) mainly led by services and private transfers.

5. Services exports registered a growth of 13.4 per cent (as against a decline of 9.7 per cent a year ago) led by trade related services such as transportation and insurance as well as miscellaneous services such as software and financial services.

6. Private transfers receipts increased sharply by 33.3 per cent (as against a decline of 31.1 per cent a year ago).

7. Investment income receipts declined by 23.5 per cent during the quarter mainly due to persistence of lower interest rates abroad.

8. Invisibles payments recorded a growth of 34.3 per cent (as against a decline of 20.8 per cent a year ago) mainly due to higher payments on account of transportation, business and financial services as well as steady payments under investment income.

9.  As growth in invisibles payments was higher than the growth in receipts, net invisibles (invisibles receipts minus invisibles payments) recorded a decline of 2.6 per cent to US$ 18.5 billion during the quarter. The decline was, however, lower as compared to Q4 of 2008-09, when it had declined by 15.8 per cent to US$ 19.0 billion.

10. The lower size of invisibles surplus coupled with a higher trade deficit resulted in an increase in current account deficit during Q4 of 2009-10 to US$ 13.0 billion (US$ 1.2 billion during Q4 of 2008-09).

11. The continued buoyancy in capital inflows, mainly led by large inflows under portfolio investments and short-term trade credits coupled with foreign direct investments, resulted in a net capital account surplus of US$ 16.1 billion during Q4 of 2009-10 as compared with a lower surplus of US$ 1.4 billion during Q4 of 2008-09.

12. Net FDI flows (net inward FDI minus net outward FDI) amounted to US$ 3.2 billion during the quarter (almost same as that in Q4 of 2008-09). Net inward FDI stood at US$ 5.1 billion during the quarter (US$ 8.0 billion in Q4 of 2008-09). Net outward FDI remained lower at US$ 1.9 billion (US$ 4.8 billion in Q4 of 2008-09).

13.  Net portfolio investments were higher at US$ 8.8 billion, mainly supported by strong net inflows by the foreign institutional investors amounting to US$ 8.5 billion during Q4 of 2009-10 (as against net outflows of US$ 2.6 billion by FIIs in Q4 of 2008-09).

14. Net External Commercial Borrowings (ECBs) were relatively low at US$ 0.1 billion during the quarter (US$ 1.0 billion in Q4 of 2008-09) mainly due to increased repayments of commercial loans to India. Short-term trade credits to India recorded a net inflow of US$ 5.0 billion in Q4 of 2009-10 as against a net outflow of US$ 2.6 billion during Q4 of 2008-09. 

15. Banking capital recorded net outflows at US$ 0.9 billion during the quarter (as compared with net outflows of US$ 3.3 billion in Q4 of 2008-09) mainly due to build up of foreign assets of commercial banks.

16. There was an increase in foreign exchange reserves on BoP basis (i.e., excluding valuation) of US$ 2.1 billion in Q4 of 2009-10 as compared with an increase of US$ 0.3 billion in Q4 of 2008-09. In nominal terms (i.e., including valuation changes), foreign exchange reserves declined by US$ 4.4 billion during the quarter reflecting appreciation of US dollar against major international currencies during the quarter.

Table 2 and Statement II present developments in major items of BoP during 2009-10. Major developments are as under :

(i) On a BoP basis, India’s merchandise exports posted a decline of 3.6 per cent during 2009-10 (as against a growth of 13.7 per cent in the previous year).

(ii) Import payments, on a BoP basis, also remained lower recording a decline of 2.7 per cent (as compared with a growth of 19.4 per cent in the previous year).

(iii) On a BoP basis, the merchandise trade deficit decreased marginally to US$ 117.3 billion (8.9 per cent of GDP) during 2009-10 from US$ 118.7 billion (9.8 per cent of GDP) in 2008-09.

(iv) Invisibles receipts recorded a decline of 1.4 per cent (as against an increase of 9.8 per cent in 2008-09), mainly due to lower receipts under miscellaneous services such as business, financial and communication services coupled with lower investment income receipts (Table 3).

(v) Private transfer receipts, comprising mainly remittances from Indians working overseas, increased to US$ 53.9 billion in 2009-10 from US$ 46.9 billion in the previous year. Private transfer receipts constituted 15.7 per cent of current receipts in 2009-10 (13.3 per cent in 2008-09). Under Private transfers, the inward remittances for family maintenance accounted for about 56.1 per cent of the total private transfer receipts, while local withdrawals accounted for about 43.7 per cent in 2009-10.

Table 3 : Invisibles Gross Receipts and Payments
(US$ billion)
Item	Invisibles Receipts				Invisibles Payments
	April-March		January-March		April-March		January-March
	2008-09 (PR)	2009-10 (P)	2008-09  (PR)	2009-10 (P)	2008-09 (PR)	2009-10 (P)	2008-09  (PR)	2009-10 (P)
1	2	3	4	5	6	7	8	9
A. Services (1 to 5)	101.7	93.8	23.7	26.9	52.0	59.6	13.1	18.9
1.Travel	10.9	11.9	2.7	3.4	9.4	9.3	2.6	2.6
2.Transportation	11.3	11.1	2.9	3.1	12.8	11.9	2.5	3.6
3.Insurance	1.4	1.6	0.3	0.4	1.1	1.3	0.3	0.3
4.Govt. not included elsewhere	0.4	0.4	0.1	0.1	0.8	0.5	0.4	0.2
5.Miscellaneous	77.7	68.7	17.7	19.9	27.9	36.5	7.3	12.2
Of Which:
Software	46.3	49.7	10.8	14.3	2.8	1.5	0.5	0.3
Non-Software	31.4	19.0	6.9	5.6	25.1	35.0	6.8	11.9
B. Transfers	47.5	54.4	10.0	13.2	2.7	2.3	0.4	0.6
Private	46.9	53.9	9.8	13.1	2.3	1.8	0.3	0.5
Official	0.6	0.5	0.2	0.1	0.4	0.5	0.1	0.1
C. Income	14.3	13.0	3.4	2.7	18.8	20.4	4.6	4.8
Investment Income	13.5	12.1	3.2	2.5	17.5	18.7	4.3	4.3
Compensation of Employees	0.8	0.9	0.2	0.2	1.3	1.7	0.3	0.5
Invisibles (A+B+C)	163.5	161.2	37.1	42.8	73.6	82.3	18.1	24.4
P: Preliminary.                             PR: Partially Revised.

(vi) Software receipts at US$ 49.7 billion showed an increase of 7.4 per cent in 2009-10 (compared with an increase of 14.9 per cent a year ago).

(vii) Invisibles payments witnessed a higher growth of 11.8 per cent (0.6 per cent in 2008-09) mainly due to higher business, financial and communication services, and increase in payments under investment income account.

(viii) Net invisibles (invisibles receipts minus invisibles payments) stood at US$ 78.9 billion during 2009-10 as compared with US$ 89.9 billion during 2008-09. At this level, the invisibles surplus financed 67.3 per cent of the trade deficit (as against 75.8 per cent during 2008-09).

(ix) Despite a lower trade deficit, decline in invisibles surplus led to higher current account deficit at US$ 38.4 billion (US$ 28.7 billion in 2008-09).

(x) Net capital flows at US$ 53.6 billion was much higher, as compared with US$ 7.2 billion in 2008-09, mainly due to larger inflows under FDI, portfolio investments and short-term trade credits (Table 4).

(xi) Due to lower outward FDI, the net FDI (inward FDI minus outward FDI) was higher at US$ 19.7 billion in 2009-10 as compared with US$ 17.5 billion in 2008-09.

(xii) Portfolio investment witnessed large net inflows of US$ 32.4 billion (as against a net outflow of US$ 14.0 billion in 2008-09) due to large net FII inflows of US$ 29.0 billion.

Table 4 : Net Capital Flows
(US $ billion)
Item	April-March		January-March
	2008-09 (PR)	2009-10 (P)	2008-09 (PR)	2009-10 (P)
1	2	3	4	5
1. Foreign Direct Investment	17.5	19.7	3.2	3.2
Inward FDI	35.0	31.7	8.0	5.1
Outward FDI	17.5	12.0	4.8	1.9
2. Portfolio Investment	-14.0	32.4	-2.7	8.8
Of which:
FIIs	-15.0	29.0	-2.6	8.5
ADR/GDRs	1.2	3.3	0.0	0.1
3. External Assistance	2.6	2.0	0.8	0.8
4. External Commercial Borrowings	7.9	2.5	1.0	0.1
5.  NRI Deposits	4.3	2.9	2.2	-0.6
6. Banking Capital excluding NRI Deposits	-7.5	-0.8	-5.4	-0.4
7.  Short-term Trade Credits	-1.9	7.7	-2.6	5.0
8.  Rupee Debt Service	-0.1	-0.1	-0.1	-0.1
9.  Other Capital	-1.5	-12.7	5.1	-0.9
Total   (1 to 9)	7.2	53.6	1.4	16.1
P: Preliminary.    PR: Partially Revised.

(xiii) Net external commercial borrowings (ECBs) slowed down to US$ 2.5 billion (US$ 7.9 billion in 2008-09) mainly due to increased repayments.

(xiv) Net short-term trade credits to India increased significantly to US$ 7.7 billion from net outflows of US$ 1.9 billion a year ago, reflecting the international confidence in domestic importers.

(xv) The increase in foreign exchange reserves on a BoP basis (i.e., excluding valuation) was US$ 13.4 billion in 2009-10 (as against a sharp decline in reserves of US$ 20.1 billion in 2008-09). [A Press Release on the Sources of Variation in Foreign Exchange Reserves is separately issued].

3. Select Key External Sector Indicators

(i) The details of key external sector indicators are set out in Table 5.

Table 5: Key Indicators of India's Balance of Payments
Item	April-March
	2007-08 (R)	2008-09 (PR)	2009-10 (P)
Merchandise Trade
1. Exports (US $ on BoP basis) Growth Rate ( %)	28.9	13.7	-3.6
2. Imports (US $ on BoP basis) Growth Rate ( %)	35.1	19.4	-2.7
3. Crude Oil Prices US $ Per Barrel (Indian Basket)	79.2	82.7	69.6
4. Exports/ GDP ( %)	13.5	15.6	13.9
5. Imports/ GDP  ( %)	21.0	25.4	22.8
6. Trade Balance/ GDP ( % )	-7.4	-9.8	-8.9
Invisibles
7. Net Invisibles (US $ billion)	75.7	89.9	78.9
8. Net Invisible Surplus / Trade Deficit ( % )	82.8	75.8	67.3
9.Net Invisibles/ GDP ( % )	6.2	7.4	6.0
Current Account
10. Current Account Balance ( US $ billion)	-15.7	-28.7	-38.4
11. Current Account Balance / GDP ( % )	-1.3	-2.4	-2.9
Capital Account
12. Gross Capital Inflows ( US $ billion)	438.4	312.4	344.0
13. Gross Capital Outflows ( US $ billion)	331.8	305.2	290.4
14. Net Capital Flows ( US $ billion)	106.6	7.2	53.6
15. Net Capital Inflows / GDP ( % )	8.7	0.6	4.1
Openness Indicators
16. Exports plus Imports of Goods / GDP ( % )	34.5	41.0	36.7
17. Current Receipts plus Current Payments / GDP ( % )	52.5	60.5	55.2
18. Gross Capital Inflows plus Outflows / GDP ( % )	62.7	51.0	48.3
Reserves
19. Import Cover of Reserves  (in months)	14.4	9.8	11.2
20. Outstanding Reserves as at end period (US $ billion)	309.7	252.0	279.1
R: Revised.      PR: Partially Revised.      P: Preliminary.

4. External Debt for the Quarter ending March 2010

(i) As per the existing practice, the external debt for the quarters ending March and June are compiled and released by the Reserve Bank of India, 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 March 2010 are being released by the Reserve Bank of India today.

 Ajit Prasad
Manager

Press Release : 2009-2010/1791