Current account deficit shrinks in Q4 FY11

India's current account deficit (CAD) for the January to March quarter has been lower as against the earlier quarters of FY12 as well as compared to the corresponding quarter of the previous year, the Reserve Bank of India (RBI) said. The CAD narrowed to US$5.4bn in the three months ended March 31, 2011 from a revised US$10bn in the previous quarter (October to December), the central bank said.

Current account deficit widens

Current account deficit in the April to June quarter widened to US$13.7bn from US$4.5bn in the year earlier, the RBI said. The deficit widened compared to the nearly US$13bn reported in the January to March quarter, which too was a record. The trade deficit for the first quarter of FY11 was higher at US$34.2bn compared with US$25.6bn in the year-earlier period. The merchandise deficit was also higher than the US$31.5bn reported in the January-March quarter. Strong overseas capital inflows helped keep the overall Balance of Payments (BoP) to remain in a surplus at US$3.74bn, compared with US$2.1bn in the January to March quarter and a surplus of about US$100mn in the year-ago period.

Current account deficit

India’s current account deficit for Q1 FY10 at US$5.8bn was 35% lower than the deficit during Q1 FY09 of US$9bn. The deterioration from Q4 FY09 (surplus of US$4.7bn) reflects seasonality (Q4 being a stronger quarter). More importantly, capital flows turned positive after two consecutive quarters of outflows. Consequently, India returned to a BoP surplus after a gap of three quarters. India’s external debt rose marginally (by US$3.7bn) during Q1 FY10. However, the entire rise was due to valuation reasons; on constant currency basis external debt would have actually declined by US$1.3bn. As of June 2009, India’s total external debt stood at US$228bn - an extremely comfortable level given the size of the economy and its foreign exchange reserves.

The RBI said in a statement that the capital account showed a turnaround from a negative balance in the last two quarters of 2008-09 to a positive balance of US$6.7bn during the first quarter of 2009-10. Private transfer receipts, comprising mainly remittances from Indians working overseas and local withdrawals from NRI rupee deposits, increased by 9.4% to US$13.3bn during April-June quarter from US$12.2bn a year ago.

Gross capital inflows to India revived during the April-June quarter as compared to the corresponding period of last year. "The gross inflows were at US$78.5bn as compared to US$90.9bn in April-June 2008-09 mainly led by inflows under FIIs, FDI and NRI deposits," the RBI said. Gross capital outflows during the first quarter this fiscal stood lower at US$71.8bn as against US$79.7bn in the corresponding period last fiscal.

There is expectation that the annual current account deficit figure will be sharply lower from last year's US$30bn. Experts also see an improvement in capital flows, especially debt capital flows in the next few quarters.

Current account deficit shoots up in Q3 FY09

India's current account deficit surged to the highest in 18 years in the quarter ended December 2008 as the global financial-cum-economic crisis stifled trade as well as capital inflows, the Reserve Bank of India (RBI) said. The current account deficit widened to US$14.64bn in the October-December quarter from a revised US$4.53bn a year earlier, the central bank said. It was also much higher than the US12.83bn deficit in the previous quarter. Also, the capital account balance turned negative during Q3 FY09 for the first time since Q1 of FY 1998-99 mainly due to net outflows under portfolio investment, banking capital and short-term trade credit, the RBI said. According to the balance of payments (BoP) data released by the RBI, the capital account balance saw an outflow of US$3.23bn as against an inflow of US$31.27bn during the third quarter of last year. The overall BoP - the country's external sector balance-sheet - witnessed a deficit of US$17.8bn compared to record surplus of US$26.7bn recorded in the corresponding period a year ago.

Current a/c gap shoots up on oil imports

India's current account deficit widened to a new record in the second quarter of the current fiscal year, as a sharp jump in crude oil imports and a weak currency countered higher net invisible surplus. The shortfall in the current account, a broad measure of trade and investment flows, increased to US$12.54bn as against US$4.3bn in Q2 of 2007-08, and US$9.8bn in the previous quarter, the Reserve Bank of India (RBI) said. The Capital Account had a surplus of US$7.8bn in Q2 2008-09 as against US$33.53bn in the same period last year, resulting in a BoP deficit of US$4.7bn for the second quarter versus a surplus of US$29.2bn in the year-ago period.

Current a/c deficit jumps on higher oil imports

India's current account deficit climbed in the first quarter of the current fiscal year as a widening trade gap, fueled by increased oil imports, offset higher net invisible surplus, the Reserve Bank of India (RBI) said. Current account deficit in the quarter ended June stood at US $ 10.7bn versus US $ 6.3bn in Q1 of 2007-08, data released by the central bank showed. The capital account had a surplus of US$12.96bn in the quarter ended June as against US$17.5bn in the same quarter a year earlier. As a result, the BoP surplus for the Apr-June quarter fell to US$2.2bn from US$11.2bn in the year-ago period.

Net FDI flows were higher at US$10.1bn in Q1 FY09 as against US$2.7bn in Q1 FY08. Portfolio investment witnessed large net outflows (US$4.2bn) in Q1 FY09 compared to net inflows of US$7.5bn in the same quarter last year. Net ECB inflows to India amounted to US$1.3bn in Q1 FY09 as against US$6.9bn in the corresponding quarter of last year. This constituted 11.8% of net capital flows as against 40.3% last year. Net accretion to foreign exchange reserves on a BoP basis (i.e., excluding valuation) was US$2.2bn in Q1 FY09 versus US$11.2bn in the first quarter last year.

Merill Lynch - Current Account Deficit

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