The data on India’s balance of payments (BoP) are released by the Reserve Bank on a quarterly basis with a lag of one quarter. This article highlights the major developments in India’s BoP during the second quarter (July-September) of 2014-15.

Highlights

• India’s current account deficit (CAD) in Q2 of 2014-15 was relatively higher than in the preceding quarter primarily on account of a higher trade deficit (Table 1).

• With global demand conditions remaining subdued, merchandise exports growth slowed, while imports recorded a significant increase.

• Net services receipts improved in Q2 of 2014-15 from their level a year ago, largely on account of pick-up in telecommunication, computer and information services (Table 2).

• Net outflow on account of primary income, comprising investment income and compensation of employees, continued in Q2 of 2014-15, mainly due to a sharp increase in payments towards dividend on portfolio investment in India and interest on NRI deposits (Table 2).

• During Q2 of 2014-15, net receipts under secondary income, comprising mainly remittances, showed an improvement in relation to their level a year ago (local withdrawals from NRI deposits constituted 37.5 per cent of total private transfers in H1 of 2014-15) (Tables 2 and 3).

• The current account deficit (CAD) increased to 2.0 per cent of GDP in Q2 of 2014-15 from 1.7 per cent of GDP in Q2 of 2013-14.

• Net capital inflows were driven by robust FDI inflows and a sharp turnaround in FII flows (Table 4).

• The increase in FDI inflows (y-o-y basis) occurred across all major sectors barring construction (Table 5) during H1 of 2014-15 and was primarily sourced from Mauritius, the USA, Singapore, the UK, Japan and Netherlands (Table 6).

• On the other hand, FDI by India witnessed moderation across all sectors during H1 of 2014-15 (Table 5) and Singapore remained the major destination of India’s outward FDI (Table 6 and 7).

• Loans (net) availed by deposit taking corporations (commercial banks) recorded an outflow in Q2 of 2014-15 owing to higher repayments of overseas borrowings and a build-up of banks’ overseas foreign currency assets.

• The amount of loans (net) of other sectors (i.e., external commercial borrowings) at US$ 1.4 billion was a tad higher than US$ 1.3 billion in Q2 of 2013-14.

• Net inflows of NRI deposits were lower in Q2 of 2014-15 as compared with the level recorded in the corresponding period of the previous year.

• Net outflow under trade credits and advances at US$ 0.2 billion was much lower in Q2 of 2014-15 than the outflow of US$ 1.9 billion in Q2 of 2013-14.

• Other receivables/payables which include lead and lags in exports, net funds held abroad, advances received pending issue of shares under FDI and other capital not included elsewhere recorded a net outflow of US$ 3.4 billion during H1 of 2014-15 as compared to an outflow of US$ 5.2 billion in the corresponding period of the previous year (Table 8).

• On a BoP basis¹, there was a net accretion of US$ 6.9 billion to India’s foreign exchange reserves during Q2 of 2014-15 as against a drawdown of US$ 10.4 billion during the same period of the preceding year (Table 1).

* Prepared in the Division of International Trade and Finance, Department of Economic and Policy Research, Reserve Bank of India, Mumbai. Time series data on BoP are available on the RBI website at dbie.rbi.org.in. In addition, the disaggregated quarterly data on invisibles are being released separately on the RBI website.

¹ Excluding valuation changes in reserves due to cross-currency movements.