The Hindu : Business : Current account deficit put at $3.25 billion in first half

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Saturday, Jan 01, 2005

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Business

Current account deficit put at $3.25 billion in first half

MUMBAI, DEC. 31. Driven by a surge in import payments for crude oil, petroleum products and merchandise, the current account saw a deficit of $3.25 billion in the first half ended September 30, 2004, as against a surplus of $2.19 billion in the same period last year.

The trade deficit during the period under reference shot up to $17.44 billion from $9.35 billion in the corresponding period in the previous year. Net invisibles showed a gain of 22.77 per cent at $14.18 billion ($11.55 billion), according to data released by the Reserve Bank of India here today.

Exports during the first half grew by 23.21 per cent to $34.45 billion ($27.96 billion in first half of 2003-04 ) while imports were higher by 39.07 per cent at $51.89 billion ($37.31 billion).

Imports of crude oil and petroleum products were the key drivers of the surge in import payments, contributing 58.1 per cent in July-September, 2004 (second quarter) and 57.6 per cent in the first quarter.

Sharp rise in oil imports

The sharp rise in oil imports reflected the impact of high international crude prices of $32-41 a barrel for the Dubai variety in the second quarter and $29-35 in the first quarter.

Merchandise import payments rose by 24.6 per cent in the first quarter and 53.5 per cent in the second quarter. Non-oil imports increased from 22.2 per cent in the first quarter to 29.5 per cent in the second quarter on the back of firming up of industrial activity, the RBI said.

The tourist interest in India remained strong with international traffic rising by 26 per cent in the first half of 2004-05 while software exports remained buoyant in the second quarter, broadly maintaining the level achieved in the previous quarter, it added.

The RBI said merchandise exports recovered from a deceleration in July-August 2004, and resumed the seasonal upturn that typically begins in September.

The cumulative export growth in the first six months, exceeded the annual target of 16 per cent in dollar terms for the current fiscal.

Invisible payments

Invisible payments declined marginally in the second quarter in relation to the previous quarter, although they were higher by 36 per cent on year-on-year basis.

The payments on account of outbound tourist traffic, transportation and other business services continued to rise in line with expanding demand for travel and imports of services such as management consultancy, engineering, technical and distribution services, it said.

The massive expansion in the trade deficit in the second quarter and decline in net invisible surplus turned the current account into a deficit of $6.4 billion after a run of surplus, which began in the second quarter, the RBI said.

For the first half of 2004-05, the current account recorded a deficit of $3.3 billion, which reflected the strengthening of investment demand and industrial activity, it added.

In the second quarter, among the components of capital flows (net), external commercial borrowings (ECBs) and short-term credit moderated while there were outflows under banking capital.

Non-resident deposits continued to register new outflow as in April-June 2004, responding to alignment of interest rates on these deposits with international rates, the RBI added.

— PTI

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