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Unit 12: Balance of Payments

year, after consecutive declines in the last four quarters. (ii) Imports registered a growth of 2.6 Notes
per cent in Q3 of 2009-10 after recording consecutive declines in the last three quarters.
(iii) Private transfer receipts remained robust during Q3 of 2009-10. (iv) Despite low trade
deficit, the current account deficit was higher at US$ 12.0 billion during Q3 of 2009-10 mainly due
to lower invisibles surplus. (v) The current account deficit during April-December 2009 was
higher at US$ 30.3 billion as compared to US$ 27.5 billion during April-December 2008.
(vi) Surplus in capital account increased sharply to US$ 43.2 billion during April-December 2009
(US$ 5.8 billion during April-December 2008) mainly on account of large inflows under FDI,
Portfolio investment, NRI deposits and commercial loans. (vii) As the surplus in capital account
exceeded the current account deficit, there was a net accretion to foreign exchange reserves of
US$ 11.3 billion during April-December 2009 (as against a drawdown of US$ 20.4 billion during
April-December 2008).

Major Highlights of BOP during October-December 2010 (Q3) of 2010-11

On a BOP basis, exports recorded a growth of 39.8 per cent while imports registered a
growth of 24.9 per cent, year-on-year, during Q3 of 2010-11.
The trade deficit in absolute terms amounted to US$ 31.6 billion, broadly the same as in
the corresponding quarter of last year.
Net services recorded a growth of 49.3 per cent (as against a decline of 46.0 per cent a year
ago) mainly due to strong growth in receipts led by travel, transportation, software,
business and financial services.
Private transfer receipts remained buoyant at US$ 14.1 billion during the quarter.
Consequently, net invisibles balance under reference showed an increase of 17.0 per cent
(as against a decline of 19.0 per cent a year ago).
The Current Account Deficit (CAD) moderated to US$ 9.7 billion compared to the
corresponding quarter of last year mainly due to recovery in the invisibles surplus.
The capital account surplus increased marginally over the corresponding quarter of last
year mainly due to higher net inflows under FII investments, external assistance, external
commercial borrowings
With capital account surplus being higher than the current account deficit, there was a net
accretion to foreign exchange reserves of US$ 4.0 billion during the quarter.

Case Study India’s BOP Surplus Shrinks

ndia’s balance of payments (BoP) recorded a small surplus of $1.8 billion ( 8,118
crore) in Q3FY10, smaller than the surplus of $9.4 billion recorded in the previous
Iquarter. Quarter-on-quarter (Q-o-q), there was a slowdown on the capital account side.
The current account was largely stable.

Current account deficit stood at around $12 billion during the quarter under review, not
showing much movement either on q-o-q or year-on-year (y-o-y) basis. Trade deficit,
which was on a widening trend since March 2009, shrunk marginally for the first time
(from around $32 billion in Q2 to about $31 billion in Q3). Exports climbed around 13%
y-o-y during Q3FY10 after consecutive declines in the previous four quarters. Imports also

Contd...

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