Preliminary data on India’s balance of payments (BoP) for the second quarter (Q2), i.e., July-September, 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 July-September 2014

• India’s current account deficit (CAD) increased to US$ 10.1 billion (2.1 per cent of GDP) in Q2 of 2014-15 from US$ 7.8 billion (1.7 per cent of GDP) in the preceding quarter and US$ 5.2 billion (1.2 per cent of GDP) in Q2 of 2013-14.

• The increase in CAD was primarily on account of higher trade deficit contributed by both a deceleration in export growth and increase in imports.

• On BoP basis, merchandise export growth decelerated to 4.9 per cent in Q2 of 2014-15 from 11.9 per cent in Q2 of 2013-14.

• On BoP basis, merchandise imports increased by 8.1 per cent in Q2 of 2014-15 as against a decline of 4.8 per cent in Q2 of 2013-14, largely due to a sharp rise in gold imports.

• Net services receipts improved by 3.4 per cent in Q2 of 2014-15 on a pick-up telecommunication, computer and information services from their level a year ago.

• Net outflow on account of primary income (profit, dividend and interest) amounting to US$ 6.9 billion in Q2 of 2014-15 was higher than the corresponding quarter of 2013-14 (US$ 6.3 billion) as well as the preceding quarter (US$ 6.7 billion).

• In Q2 of 2014-15, gross private transfer receipts at US$ 17.4 billion were marginally higher as compared with the corresponding quarter of 2013-14.

• In the financial account, net flows through foreign direct investment were stable; however, portfolio investment recorded inflows of US$ 9.8 billion as against an outflow of US$ 6.6 billion in Q2 of 2013-14.

• ‘Loans’ (net) availed by deposit taking corporations (commercial banks) witnessed an outflow of US$ 4.6 billion in Q2 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 at US$ 4.1 billion were lower in Q2 of 2014-15 than US$ 8.2 billion in Q2 of 2013-14.

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

• Net outflow under trade credits and advances at US$ 0.2 billion was much lower than US$ 1.9 billion in Q2 of 2013-14 albeit there was net inflow in the preceding quarter.

• On a BoP basis, there was a net accretion of US$ 6.9 billion to India’s foreign exchange reserves in Q2 of 2014-15 as against a drawdown of US$ 10.4 billion in Q2 of 2013-14 (Table 1).

BoP during April-September 2014 (H1 of 2014-15)

• With a relatively higher growth in merchandise exports and marginal rise in merchandise imports, India’s trade deficit narrowed to US$ 73.2 billion in H1 of 2014-15 from US$ 83.8 billion in H1 of 2013-14.

• Lower trade deficit coupled with a marginal rise in net services receipts moderated the CAD to US$ 17.9 billion in H1 of 2014-15 (1.9 per cent of GDP) from US$ 26.9 billion in H1 of 2013-14 (3.1 per cent of GDP).

• Net inflows under the capital and financial account (excluding change in foreign exchange reserves) rose to US$ 38.5 billion in H1 of 2014-15 from US$ 15.8 billion in H1 of 2013-14.

• Lower CAD and rise in flows under financial account resulted in an accretion to India’s foreign exchange reserve to the tune of US$ 18.1 billion in H1 of 2014-15 as against a drawdown of US$ 10.7 billion in H1 of 2013-14.

Alpana Killawala
Principal Chief General Manager

Press Release : 2014-2015/1176