Continuing improvement in external sector, the country’s current account deficit (CAD) narrowed further to $4.2 billion in Q3, from $5.2 billion in Q2 and $21.8 billion in Q1 in the ongoing fiscal; and $18.2 billion in Q4 and a record high $31.9 billion in Q3 of the preceding fiscal 2012-13. The ratio of CAD to GDPmp worked out to 0.9 per cent, against a recent quarters’ high of 6.5 per cent in Q3 of 2012-13. The lower CAD was primarily on account of a decline in the trade deficit as merchandise exports picked up and imports moderated, particularly gold imports.

On BoP basis, merchandise exports increased 7.5 per cent to $79.8 billion in Q3, speeding from 3.9 per cent in Q3 of 2012-13, on the back of significant growth, especially in exports of engineering goods, readymade garments, iron ore, marine products and chemicals. Merchandise imports declined 14.8 per cent to $112.9 billion; against an increase of 10.4 per cent in Q3 a year ago Gold imports fell from $17.8 billion to $3.1 billion.

Net service receipts improved during Q3, essentially reflecting a decline in payments on account of service imports. Net services at $18.1 billion recorded a growth of 8.9 per cent. Net outflow on account of primary income (profit, dividend and interest) amounted to $5.4 billion ($5.8 billion) Gross private transfer receipts were placed at $17.3 billion, showing an increase of 4.4 per cent (y-o-y).

In the financial account, on net basis, foreign direct investment and portfolio investment recorded inflows of $6.1 billion and $2.4 billion, respectively. Within portfolio investment, the debt segment showed net outflow which, however, was offset by higher net inflows of $6.2 billion under the category of equity.

Loans (net) availed by commercial banks witnessed an outflow of $5.9 billion owing to repayments of overseas borrowings and a build-up of their overseas foreign currency assets. Net inflow under NRI deposits amounted to $21.4 billion, as compared to $2.7 billion in Q3 a year ago. The sharp increase in NRI deposits was on account of fresh FCNR(B) deposits mobilised under the swap scheme offered by RBI during September-November 2013. ECB was placed at $4.1 billion. Net flows under trade credits and advances continued to be negative.

There was a net accretion of $19.1 billion to India’s foreign exchange reserves on BoP basis as compared to a drawdown of $10.4 billion in the preceding quarter.

Trends during April-December
The turnaround in export growth and decline in imports from July has led to a sharp improvement in the trade deficit to $116.9 billion, from $150.0 billion in April-December 2012. Contraction in the trade deficit, coupled with a rise in net invisible receipts, resulted in a reduction of the CAD to $31.1 billion (2.3 per cent of GDPmp), from $69.8 billion (5.2 per cent of GDPmp) in April-December of 2012. In services, telecom, computer and information services constitute the main income source, with travel and transport (mainly freight) forming the balance amount. All other business, financial, construction, etc incomes don’t contribute much at aggregate level. Primary income outflow drained away around a third of secondary income receipt.

Net inflows under the capital and financial account (excluding change in foreign exchange reserves) declined to $39.7 billion from $68.5 billion in corresponding period of 2012-13 owing to net outflows on account of portfolio investment, higher repayment of loans, and lower trade credit & advances. In a major change, whereas FDI into the country increased from $19.78 billion to $20.98 billion that made overseas by Indian residents plummeted from $5.7 billion to only $0.327 billion.

On BoP basis, foreign exchange reserves increased $8.4 billion ($1.1 billion).

Trade Balance
Net Services
Primary Income, Net
Secondary Income, Net
Current Account Balance
Capital and Financial Account (including e&o & forex reserves)
Direct Investment (net)
Portfolio Investment
NRI Deposits
Banking Capital
Short-term Trade Credit etc.
Other Receivables/Payables
External Assistance
Change in Reserves (on BoP account)
Valuation Change
Change in Reserves

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