Current a/c deficit widens to $4.70 billion

The country's current account deficit during April-June 2007 widened marginally to $4.70 billion from $4.57 billion a year earlier. Higher remittances by non-resident Indians (NRIs) and increased export earnings of software companies kept the current account deficit in check.

India's trade deficit increased to $21.6 billion in the first quarter of the current financial year as against $16.9 billion in the corresponding quarter last year, said the Reserve Bank of India, in its data on India's Balance of Payments (BoP) Developments during the first quarter of 2007-08.

The increase in trade deficit was mainly driven by a rise in non-oil imports. Invisible receipts rose by 27.5 per cent in the first quarter of 2007-08 against 23.7 per cent in the first quarter of 2006-07.

The rise is mainly due to momentum in software services, travel earnings, other professional and business services, besides the steady inflow of remittances from overseas Indians. Net invisibles, mainly led by the higher growth in private transfers, were at $16.9 billion during April to June, 2007-08, an increase of 36.4 per cent compared with the figures in the corresponding quarter last year.

Travel earnings witnessed growth of 22.2 per cent compared with 19 per cent in the first quarter of 2006-07, reflecting the pattern in tourist arrivals.

Private transfer receipts, mainly comprising remittances from Indians working overseas, were higher at $8.6 billion in the period under consideration against $5.9 billion in the corresponding period last year.

The balance of payments (BoP) surplus in the first quarter was $11.2 billion compared with $6.38 billion in April-June 2006. India's external debt rose to $165.4 billion at the end of June, up by $8.7 billion from the March-end.

Net accretion to foreign exchange reserves on a BoP basis, excluding valuation, stood at $11.2 billion in the first quarter of 2007-08 and was mainly led by strong capital inflows.

Taking into account the valuation gains of $3 billion, foreign exchange reserves recorded an increase of $14.2 billion in April to June of 2007-08 compared with $11.3 billion in the corresponding period last year.

At the end of June 2007, India's outstanding foreign exchange reserves stood at $213.4 billion, marking the fifth largest stock of reserves among the emerging market economies and the sixth largest in the world.