India Balance of Payments

The current account deficit tripled in FY18, but remains within manageable limits.

Published quarterly by Reserve Bank of India. Updated until the January-March 2018 quarter. (Published on June 13th, 2018)

Recent Data Trend

India's current account deficit (CAD) worsened to USD 13 billion (1.9% of GDP) during Jan-Mar'18 (Q4 FY18) from a level of USD 2.6 billion (0.4% of GDP) in the corresponding quarter a year ago. The widening of CAD was on account of a rise in crude oil prices which resulted in a widening trade deficit. The merchandise trade deficit rose to USD 41.6 billion in Q4 2017-18.  The surge in crude oil prices increased the import bill for India. During the concerned period, the global crude oil price rose by 19% in the last one year.

Despite the soaring CAD, the forex reserves grew by USD 13.2 billion in Q4 FY18 due to a stronger capital account surplus. This was greater than the addition of USD 7.2 billion to the forex pool in the year-ago period.

The capital and financial account surplus rose to USD 11.8 billion in Q4 2017-18 from USD 3 billion in Q4 2016-17, supported by stronger FDI and portfolio investment inflows worth USD 8.7 billion.

In annual terms, the CAD rose to USD 48.7 billion in FY18 from USD 15.3 billion in FY17. The CAD as a % of GDP has more than tripled in the last one year to 1.9% of GDP in 2017-18 from 0.6% of GDP in 2016-17. The rise in import bill due to rise in the crude oil prices augmented by 18% YoY increase in the non-oil imports led to the widening of CAD in FY18. The soaring of CAD was mitigated to some extent by net portfolio investment inflows of USD 22.1 billion more than thrice the USD 7.6 billion in FY17. 

With the CAD soaring the rupee is likely to witness a downward pressure, which has already fallen by 5.5% against the USD in 2018. We believe, that CAD rising is surely a concern but it is still within manageable limits. However, with crude oil prices on the rise, the road ahead would surely be turbulent. The only respite we have as of now is the healthy cushion of forex reserves of more than USD 410 billion.

Balance of Payment- Annual

Brief Overview

The Balance of Payments (BoP) records all economic transactions between residents of a country and rest of the world. The BoP account consists of Current account, Capital account, and Financial Account. 

The current account includes flows of goods, services, primary income, and secondary income between residents and non-residents and thus constitutes an important segment of BoP. The primary income account reflects the amounts payable and receivable in return for providing temporary use of labor, financial resources, or non-produced non-financial assets (natural resources). The secondary income account shows redistribution of income between resident and non-residents, i.e when resources for current purposes are provided without economic value being exchanged in return (transfers).

On the other hand, the capital account comprises credit and debit transactions under non-produced non-financial assets and capital transfers between residents and non-residents. Thus, acquisitions and disposals of non-produced non-financial assets, such as land sold to embassies and sales of leases and licenses, as well as transfers which are capital in nature, are recorded under this account.

The financial account reflects net acquisition and disposal of financial assets and liabilities during a period. Further, it shows how the net lending to or borrowing from the rest of the world has occurred. Conversely, it shows how the current account surplus is used or the current account deficit is financed.

The Reserve Bank of India (RBI) has been compiling and publishing Balance of Payments (BoP) data for India since 1948. Since then, several developments have taken place both globally and domestically.

Considering these developments and to bring out a comprehensive Balance of Payments Manual documenting current practices, procedures of compilation, presentation, coverage and sources of data for India’s balance of payments and assess them in relation to international best practices, India has shifted from BPM 5,1993 manual to BPM6,2009 method of accounting and classifying the data.

The above data has been compiled as per the latest IMF's BPM6 standard of classification. For further details visit the official website.

Next Release Date: September 12, 2018.