Trade deficit widens 3-fold to $15.8 bn

The crude oil prices (Indian basket) averaged $49.2 per barrel in April-June 2005 as against $34.1 a barrel in the first quarter of the last fiscal.

Exports rose to $21.75 billion in April-June 2005 $17.84 billion in April-June 2004. The imports rose to $37.56 billion in April-June 2005 from $23.01 billion in the first quarter of 2004-05.

The non-oil imports comprising items such as capital good and industrial machinery rose by 77.9 per cent while oil import bill grew by 31 per cent in the reporting quarter.

Petroleum products imports were in the range of USD 3.1 to 3.3 billion per month in April-June 2005. The monthly oil import bill Q1 of 2004-05 was lower between USD 2.1 to 2.7 billion.

The merchandise exports grew by 22 per cent in Q1, although the rate of export growth moderated reflecting the high base in the previous fiscal. The merchandise trade deficit expanded to US 15.8 billion in Q1 of 2005-06 as against USD 5.2 billion in the April-June 2004..

The sharp expansion in the trade deficit turned the current account into a deficit of $6.2 billion in April-June 2005 compared to a surplus of $3.4 billion a year earlier, according to Reserve Bank of India's preliminary balance of payments data.

The current account deficit was more than offset by surplus in the capital account, resulting in accretion to the foreign exchange reserves of $1.2 billion in Q1 of 2005-06. After factoring in the valuation changes, forex reserves declined by $3.1 billion to $138.4 billion by end of June 2005.

The country held the fifth largest stock of foreign exchange among the emerging market economies and the sixth largest in the world.

The dynamism of travel earning, sustained pace of software exports and other professional services and stable remittances from overseas Indians contributed to a healthy growth in gross invisible receipts.

The private transfers comprising remittances from Indian working abroad contributed about 23 per cent of gross invisible receipts, RBI said.

Gross invisible payments rose by 75 per cent in April-June 2005. The rise in outbound tourist traffic, transportation and insurance payments and demand for business services such as consultancy, engineering contributed to payment outflow.

The net capital inflows at $7.1 billion were driven mainly by foreign direct investment, portfolio investment and external commercial borrowings. (ECBs) and banking capital . The FDI increased to $1.05 billion in Q1 from $717 million a year ago. Much of FDI went into cement, sugar, plastic, synthetic and rubber industries.

The portfolio investment showed over 10-fold rise to $864 million from USD 81 million. FII inflows recorded a turnaround in June with a net inflow of $1.2 billion. Inflows through American and Global depository receipts also remained strong in the quarter.

The NRI deposits showed net small positive inflows in April-June 2005 as against net outflows of $1.77 billion. The short-term credit showed net outflow as oil companies' stepped-up their recourse to domestic financing and accelerated repayments.