Aided by higher trade deficit and lower net invisibles, India’s current account deficit in the September quarter widened to a record $15.8 billion, Reserve Bank of India (RBI) data showed.
In the corresponding quarter last year current account deficit was at $9.2 billion.
Despite higher growth in exports in comparison to imports, the trade deficit in absolute terms went up to $35.4 billion in the second. While exports grew up by 25 per cent, imports registered a growth of 22.8 per cent during the quarter. Net invisible receipts declined by 3.9 per cent to $19.6 billion due to higher payments under investment income.
| CURRENT AFFAIRS INDIA'S BALANCE OF PAYMENTS ($ BILLION) | |||
| 2009-10 (PR) | 2010-11 (P) | % change | |
| Exports | 43.40 | 54.30 | 25.12 |
| Imports | 73.00 | 89.60 | 22.74 |
| Trade deficit | -29.60 | -35.40 | NA |
| Invisibles (net) | 20.40 | 19.60 | -3.92 |
| Current account balance | -9.20 | -15.80 | NA |
| Capital account* | 18.60 | 19.00 | 2.15 |
| Change in reserves# | -9.40 | -3.30 | NA |
| (-Indicated increase, +indicates decrease in change in reserve) *: Including errors and omissions, #:On BoP basis excluding valuation. P:Preliminay PR: Partially Revised; Source: RBI | |||
As the financial market stabilised and economic activity picked up, capital account surplus went up primarily due to increase in portfolio investments, short-term credit and external commercial borrowings (ECBs). The capital account surplus went up to $19 billion during July-September this year, against $18.6 billion in the year-ago period.
Foreign Institutional Investors (FIIs) continued to buy shares in Indian bourses on the back of attractive returns during the quarter and therefore, inflows under portfolio investment doubled to $19.2 billion as compared to $9.7 billion in the same period last year.
As a result of higher disbursements of commercial loans to India, net ECBs went up to $3.7 billion in the quarter, against $1.2 billion in the same period last year. Companies have been taking advantage of huge liquidity and interest rate differential in the overseas market.
With an increase in imports due to strong domestic economic activity, short-term trade credit to India recorded net inflows of $ 2.6 billion during the quarter as compared with a net inflow of $1.2 billion last year.
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FDI continued to be a concern with inflows declining to $2.5 billion during the second quarter. The deceleration in FDI to India was primarily on account of lower FDI inflows under construction, real estate, business and financial services. There was significant decline in FDI from Mauritius and Singapore.
As foreign assets of commercial banks shored up, banking capital saw an outflow by $3.2 billion, against an inflow last year.
India's external debt at the end of September 2010 rose to $295.8billion, up by $262.3 million from March 2010.
India’s foreign exchange reserves increased by $17.2 billion during the quarter reflecting depreciation of the US dollar against major international currencies during the quarter.