INDIAN CURRENT ACCOUNT DEFICIT – BY Dr. BOBBY SRINIVASAN AND Dr. SUDHAKAR BALACHANDRAN

September 8, 2014 | Posted by bobbysrinivasan << back to blog

There is good news and bad news. For the first quarter of 2014-15, Indian Current Account Deficit (CAD) narrowed sharply to $7.8 billion from $21.8 billion in the year ago period. The lower CAD was primarily on account of contraction in trade deficit by both rise in exports and a decline in imports. On a balance of payment basis, merchandise exports stood at $81.7 billion and imports at $116.4 billion. Thus, resulting in a net balance of payment deficit of $34.6 billion.

The decline in imports was primarily due to a steep drop in gold imports which amounted to $7 billion as compared to $16.5 billion in the last quarter to 2013-14. Thus, comparing with the 2013-14, we have nearly $15.9 billion reduction in merchandise trade deficit (for first 2013-14 $50.5 billion, against 2014-15 $34.6 billion in the first quarter). The net services receipts improved marginally of higher exports marginally by 1.2% amounting $17.1 billion in the first quarter of 2014-15. However, the net outflow on account of primary income (profit, dividend and interest) amounted to $6.7 billion in the first quarter of 2014-15 as against $4.7 billion in the first quarter of 2013-14. Gross private transfer receipts amounted to $17.5 billion in the first quarter of 2014-15 which was marginally lower than 2013-14. Part of the reason could be the market responding positively to the rupee depreciation. The following table will provide the major items of balance of payment which are self- explanatory.

	Apr-Jun 2014 (p)			Apr-Jun 2013 (PR)
	CREDIT	DEBIT	NET	CREDIT	DEBIT	NET
CURRENT ACCOUNT	139.2	147	-7.8	130.9	152.7	-21.8
GOODS	81.7	116.4	-34.6	73.9	124.4	-50.5
OF WHICH:
PETROLEUM, OIL AND LUBRICANTS	15.8	40.8	-25	14.2	39.2	-25
SERVICES	37.6	20.5	17.1	36.5	19.7	16.9
PRIMARY INCOME	2.3	9	-6.7	2.5	7.4	-4.8
SECONDARY INCOME	17.6	1.1	16.4	18	1.3	16.7
CAPITAL ACCOUNT AND FINANCIAL ACCOUNT	147.3	138.6	8.6	135.1	114.2	20.9

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