India Balance of Payments

India's current account deficit widens on YoY basis due to a higher trade deficit in December quarter.

Published quarterly by Reserve Bank of India. Updated until the October-December 2018 quarter. (Published on March 29th, 2018)

Recent Data Trend

India's current account deficit (CAD) worsened to USD 16.9 billion (2.5% of GDP) during October-December (Q4 2018) from a level of USD 13.7 billion (2.1% of GDP) in the corresponding quarter a year ago. The widening of CAD was on account of higher imports which resulted in a widening trade deficit. The merchandise trade deficit rose to USD 49.5 billion in Q4 2018. With the given decline in crude oil prices in the global market, we can expect trade deficit to slightly reduce in the last quarter of the current year. On account of net sales in the equity market, the portfolio investment recorded a net outflow of USD 2.1 billion in Q4 2018, as compared with an inflow of USD 5.3 billion in Q4 2017.

Despite the widening CAD on year-on-year (y-o-y) basis, the Q4 2018 witnessed an accretion of USD 9.4 billion to the foreign exchange reserves (on a BoP basis) as capital account have eased appreciably lately. The capital and financial account surplus rose to USD 18 billion in Q4 2018 from USD 12.6 billion in Q4 2017, supported by stronger FDI and portfolio investment inflows worth USD 10.4 billion.

On a cumulative basis, during April-December 2018, the CAD increased to 2.6% of GDP from 1.8% of GDP during April-December 2017, led by higher trade deficit. India's trade deficit increased to USD 145.3 billion in April-December 2018 from USD 118.4 billion in the same period last year.

With the softening of oil prices as expected in the global market, the oil import bill of India is likely to witness a fall in the January-March quarter. If a stable government emerges post elections, then the foreign direct investment inflows and portfolio inflows can remain intact and strong, thus help boost the rupee exchange rate as well.

Brief Overview

The Balance of Payments (BoP) records all economic transactions between residents of a country and the 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 labour, 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: June 29th, 2019.

Balance of Payments- Annual