Analysis of India Balance of Payment 2008-09

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  • Topic: Balance of payments, Current account, Balance of trade
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  • Published : July 8, 2009
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*Analysis of India’s Balance o*f Payment
As a result of sharp decline in exports during the October-March of 2008-09, India’s merchandise exports, on a BoP basis, posted a growth of 5.4 per cent during 2008-09 which is lower to 28.9 per cent in the corresponding period of the previous year. Due to sharp fall in imports during Q4 of 08-09, import payments, on a BoP basis has fallen down to 14.3 per cent during 2008-09 from high import growth of 35.2 per cent in 2007-08. On a BoP basis, a sharp fall in exports and imports growth outpacing the growth in exports led to a widening of trade deficit to US$ 119.4 billion (or 10.3 per cent of GDP) in 2008-09 from US$ 91.6 billion (or 7.8 per cent of GDP) in 2007-08 Software receipts which are at US$ 47.0 billion had increased by 16.6 per cent during 2008-09 which was in line with the estimate of the NASSCOM. Invisibles receipts which is at US$ 162.6 billion (14.0 per cent of GDP) witnessed a slower growth of 9.4 per cent during the financial year 2008-09 as compared with a growth of 29.7 per cent in the previous year (US$ 148.6 billion or 12.7 per cent of GDP) mainly due to slow pace of growth in software services and private transfer receipts along with a decline in receipts under business services, travel and investment income account. Miscellaneous receipts, excluding software exports, stood at US$ 30.5 billion in 2008-09 (US$ 26.4 billion in 2007-08) In the capital account, inflows under foreign direct investment (FDI) to India were higher during 2008-09 than the previous year reflecting the attractiveness of India as a long-term investment destination. NRI deposits witnessed higher inflows since September 2008 responding to the hikes in ceiling interest rates on such deposits. The foreign exchange reserves on BoP basis (i.e., excluding valuation) declined mainly due to higher current account deficit coupled with lower net capital inflows. Current Account Analysis Merchandise Trade

{text:list-item} {text:list-item} Imports
According to the DGCI&S data, oil imports recorded a lower growth of 16.9 per cent during 2008-09 as compared with a high growth of 39.4 per cent in 2007-08. During the same period, the growth in non-oil imports slowed down to 13.2 per cent in 2008-09 from 33.6 per cent in the previous year. In absolute terms, oil imports accounted for about 32.4 per cent of total imports during 2008-09 (31.7 per cent in 2007-08). According to the commodity-wise DGCI&S data available for April-February 2008-09, the items under non-oil imports which showed a higher growth were edible oil, fertilizers, paper and paper products, manufactures of metals, project goods, export related items like pearls, precious and semi-precious stones, coal, coke and briquettes, and chemical materials and products, while imports of items like pulses, non-ferrous metals, transport equipments, textile yarn and fabric declined. The sharp increase in oil prices averaging US$ 116.5 per barrel during the first half of 2008-09 led to an increase in oil import payments during this period. With the decline in oil prices during the second half of 2008-09 (average of US$ 48.3 per barrel), the oil import payments came down significantly. For the full year 2008-09, however, the oil import payments were higher at US$ 93.2 billion as compared to US$ 79.7 billion in the previous year. {draw:frame} Trade Deficit

On a BoP basis, a sharp slowdown in exports and imports growth outpacing the growth in exports led to a widening of trade deficit to US$ 119.4 billion (or 10.3 per cent of GDP) in 2008-09 from US$ 91.6 billion (or 7.8...
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