September 16 2017

India Balance of Payments

During April-June 2017, India's Current Account Deficit (CAD) soared to a 4-year high of USD 14.3 billion from USD 0.38 billion a year ago, reaching 2.4% of GDP.

Published quarterly by Reserve Bank of India. Updated till the April-June 2017 quarter. (Published on September 15th, 2017)

Recent Data Trend

India's Current Account Deficit (CAD) worsened during April-June 2017, reaching a 4-year high of USD 14.32 billion from USD 0.38 billion in the corresponding quarter a year ago, as per the Balance of Payments (BoP) statistics published by the Reserve bank of India (RBI). The CAD during April-June 2017 was equivalent to 2.4% of GDP. The widening of CAD was primarily on account of broadening of the trade deficit by 72.9% YoY to USD 41.2 billion, brought about by a surge in merchandise imports.

The exports growth has suffered in the first quarter of the fiscal year due to the strong appreciation of rupee against the USD(4.5% in the first six months of 2017) and confusions pervading prior to the GST rollout.

But shrinking of export growth may be a sign of worry as the rest of the world is growing and the global demand is picking up. The surge in imports during this period was helped by imports of non-monetary gold which almost tripled to USD 11.27 billion in April-June 2017 from USD 3.9 billion in the corresponding quarter a year ago.

Despite the widening of CAD to a 4-year high, the first quarter of the fiscal year 2017-18 saw an accretion of USD 11.4 billion to the foreign exchange reserves (on a BoP basis) as compared to the USD 7 billion during April-June 2016, helped by a sizeable capital account surplus of USD 25.4 billion.

On the financial account, the foreign direct investment (FDI) in India increased to USD 10.25 billion during April-June 2017, almost double the USD 5.9 billion inflow during the corresponding quarter a year ago. In addition, the portfolio investment in India reached more than a 2-year high of USD 11.92 billion, primarily in the debt segment.

With CAD (2.4% of GDP) reaching near to its September 2014 levels, the export performance has to be improved to check on the worsening of CAD. The trade deficit in July (USD 11.45 billion) and August (USD 11.64 billion) point to a nearly USD 35 billion trade deficit in the second quarter of FY 2017-18, adding to the worsening CAD.

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 and Capital account.  Current account comprises the balance of trade of goods and services, factor incomes, and net cash transfers. On the other hand, Capital account balance reflects net change in ownership of national assets. 

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: December 15th, 2017