The country’s current account deficit (CAD) narrowed sharply to US$ 1.2 billion (0.2 percent of GDP) in Q4 of 2013-14 from US$ 18.1 billion (3.6 percent of GDP) in Q4 of 2012-13 which was also lower than US$ 4.2 billion (0.9 per cent of GDP) in Q3 of 2013-14. The lower CAD was primarily on account of a decline in the trade deficit as decline in imports was sharper than that in exports, according to a RBI release.
Following are the developments in India’s BoP during January-March 2014
- India’s current account deficit (CAD) narrowed sharply to US$ 1.2 billion (0.2 per cent of GDP) in Q4 of 2013-14 from US$ 18.1 billion (3.6 per cent of GDP) in Q4 of 2012-13 which was also lower than US$ 4.2 billion (0.9 per cent of GDP) in Q3 of 2013-14. The lower CAD was primarily on account of a decline in the trade deficit as decline in imports was sharper than that in exports.
- On a BoP basis, merchandise exports declined by 1.3 per cent to US$ 83.7 billion in Q4 of 2013-14 as against an increase of 5.9 per cent in Q4 of 2012-13.
- On the other hand, declining trend in merchandise imports (on BoP basis) continued in Q4 of 2013-14. Imports at US$ 114.3 billion moderated by 12.3 per cent in Q4 of 2013-14 as compared with a decline of 1.0 per cent in Q4 of 2012-13. Decline in imports was primarily led by a steep decline in gold imports, which amounted to US$ 5.3 billion, significantly lower than US$ 15.8 billion in Q4 of 2012-13.
- As a result, the merchandise trade deficit (BoP basis) contracted by about 33 per cent to US$ 30.7 billion in Q4 of 2013-14 from US$ 45.6 billion in the corresponding quarter a year ago.
- Net services receipts improved during Q4 of 2013-14 on account of higher exports of services. Net services at US$ 19.6 billion recorded a growth of 15.6 per cent in Q4 of 2013-14 as against a decline of 3.9 per cent in Q4 of 2012-13.
- Net outflow on account of primary income (profit, dividend and interest) amounting to US$ 6.4 billion in Q4 of 2013-14 was higher than that of US$ 5.2 billion in the corresponding quarter of 2012-13 as well as the preceding quarter (US$ 5.4 billion). In Q4 of 2013-14, gross private transfer receipts at US$ 17.3 billion also improved by 3.0 per cent over the corresponding quarter of 2012-13.
- In the financial account, on net basis, both foreign direct investment and portfolio investment recorded inflows in Q4 of 2013-14. While net inflow on account of portfolio investment was US$ 9.3 billion, net FDI flow was lower at US$ 0.9 billion.
- ‘Loans’(net) availed by deposit taking corporations (commercial banks) witnessed an outflow of US$ 5.7 billion in Q4 of 2013-14 owing to 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$ 3.7 billion in Q4 of 2013-14 as compared to US$ 2.8 billion in Q4 of 2012-13. Loans (net) availed by other sectors (i.e., external commercial borrowings) at US$ 4.9 billion also showed an increase of 19.4 per cent over Q4 of 2012-13. Net trade credits and advances, however, continued to show outflow in Q4 of 2013-14 as repayments remained higher than disbursements.
- On a BoP basis, there was a net accretion of US$ 7.1 billion to India’s foreign exchange reserves in Q4 of 2013-14 as compared with US$ 19.1 billion in the preceding quarter (Table 1).
Developments in India’s BoP during 2013-14
- Export recovery and moderation in imports led to a sharp improvement in the trade deficit to US$ 147.6 billion in 2013-14 from US$ 195.7 billion in 2012-13.
- Contraction in the trade deficit, coupled with a rise in net invisibles receipts, resulted in a reduction of the CAD to US$ 32.4 billion (1.7 per cent of GDP) from US$ 87.8 billion (4.7 per cent of GDP) in 2012-13.
- Net inflows under the capital and financial account (excluding change in foreign exchange reserves) declined to US$ 48.8 billion in 2013-14 from US$ 89.0 billion in corresponding period of 2012-13 owing to lower net FDI and portfolio flows, net repayment of loans and trade credit & advances.
- On BoP basis, foreign exchange reserves increased by US$ 15.5 billion during 2013-14 as compared with US$ 3.8 billion in 2012-13.
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