Developments in India’s Balance of Payments during the Third Quarter (October-December) of 2020-21

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Published on March 31, 2021

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Developments in India’s Balance of Payments during the Third Quarter (October-December) of 2020-21

Preliminary data on India’s balance of payments (BoP) for the third quarter (Q3), i.e., October-December 2020-21, are presented in Statements I (BPM6 format) and II (old format).

Key Features of India’s BoP in Q3:2020-21

India’s current account balance recorded a deficit of US$ 1.7 billion (0.2 per cent of GDP) in Q3:2020-21 after a surplus of US$ 15.1 billion (2.4 per cent of GDP) in Q2:2020-21 and US$ 19.0 billion (3.7 per cent of GDP) in Q1:2020-21; a deficit of US$ 2.6 billion (0.4 per cent of GDP) was recorded a year ago [i.e. Q3:2019-20].
Underlying the current account deficit in Q3:2020-21 was a rise in the merchandise trade deficit to US$ 34.5 billion from US$ 14.8 billion in the preceding quarter, and an increase in net investment income payments.
Net services receipts increased, both sequentially and on a year-on-year basis, primarily on the back of higher net export earnings from computer services.
Private transfer receipts, mainly representing remittances by Indians employed overseas, declined marginally on a y-o-y basis but improved sequentially by 1.5 per cent to US$ 20.7 billion in Q3:2020-21.
Net outgo on the primary income account, primarily reflecting payments of investment income, increased to US$ 10.1 billion from US$ 7.4 billion a year ago.
In the financial account, net foreign direct investment (FDI) recorded robust inflow of US$ 17.0 billion as compared with US$ 9.7 billion in Q3:2019-20.
Net foreign portfolio investment (FPI) was US$ 21.2 billion as compared with US$ 7.8 billion in Q3:2019-20, primarily reflecting net purchases by foreign portfolio investors in the equity market.
With repayments exceeding fresh disbursals, external commercial borrowings to India recorded net outflow of US$ 1.7 billion in Q3:2020-21 as against an inflow of US$ 3.2 billion a year ago.
Net accretions to non-resident deposits increased to US$ 3.0 billion from US$ 0.8 billion in Q3:2019-20.
There was an accretion of US$ 32.5 billion to the foreign exchange reserves (on a BoP basis) as compared with that of US$ 21.6 billion in Q3:2019-20 (Table 1).

BoP during April-December 2020

India recorded a current account surplus of 1.7 per cent of GDP in April-December 2020 as against a deficit of 1.2 per cent in April-December 2019 on the back of a sharp contraction in the trade deficit.
Net invisible receipts were lower in April-December 2020 due to a moderation in net private transfer receipts and an increase in investment income payments.
Net FDI inflows at US$ 40.8 billion in April-December 2020 were higher than US$ 31.1 billion in April-December 2019.
Net FPI inflows stood at US$ 28.9 billion in April-December 2020, higher than US$ 15.1 billion a year ago.
In April-December 2020, there was an accretion of US$ 83.9 billion to the foreign exchange reserves (on a BoP basis).

Table 1: Major Items of India's Balance of Payments
(US$ billion)
	October-December 2020 (P)			October-December 2019			April-December 2020 (P)			April-December 2019
	Credit	Debit	Net	Credit	Debit	Net	Credit	Debit	Net	Credit	Debit	Net
A. Current Account	157.4	159.2	-1.7	162.8	165.4	-2.6	430.6	398.2	32.4	485.0	510.2	-25.1
1. Goods	77.2	111.8	-34.5	81.2	117.3	-36.0	205.2	265.4	-60.2	243.9	366.4	-122.5
Of which:
POL	5.5	21.9	-16.4	10.9	31.5	-20.6	17.6	53.8	-36.3	32.1	96.7	-64.6
2. Services	53.7	30.1	23.6	55.2	33.3	21.9	150.2	85.2	65.0	160.1	97.2	62.9
3. Primary Income	5.7	15.8	-10.1	5.6	12.9	-7.4	15.8	42.9	-27.1	18.2	40.7	-22.5
4. Secondary Income	20.8	1.5	19.3	20.8	1.9	18.9	59.4	4.7	54.7	62.8	5.9	56.9
B. Capital Account and Financial Account	179.5	178.5	1.0	153.2	151.2	2.0	460.8	493.9	-33.1	433.7	408.7	25.0
Of which:
Change in Reserves (Increase (-)/Decrease (+))	0.0	32.5	-32.5	0.0	21.6	-21.6	0.0	83.9	-83.9	0.0	40.7	-40.7
C. Errors & Omissions (-) (A+B)	0.7	0.0	0.7	0.6	0.0	0.6	0.7	0.0	0.7	0.1	0.0	0.1
P: Preliminary
Note: Total of subcomponents may not tally with aggregate due to rounding off.