The Hindu Business Line : Current account deficit up at $5.47 b in Oct-Dec '04

THE country's current account has slipped into further deficit at $5.47 billion for the third quarter — October-December 2004 — from a deficit of $4 billion in the second quarter, as per the latest Balance of Payments (BoP) figures released by the Reserve Bank of India.

In the third quarter of the previous year, the current account was at a surplus of $2.615 billion.

As per RBI's BoP data, merchandise exports were up 29.5 per cent, while merchandise import payments rose 47 per cent, during April-December. During this period, POL imports were up 45.7 per cent, according to the Directorate General of Commercial Intelligence and Statistics (DGCI&S), reflecting the impact of the high international crude oil prices.

The DGCI&S data indicated a 34.4 per cent increase in non-POL imports, driven mainly by imports of `industrial inputs' on the back of firming up of industrial activity. Consequently the trade deficit hit a historic peak at $11.8 million.

Boosted by higher exports of business services, invisible receipts rose to $18.4 billion, regaining the level of the first quarter, after briefly dipping in the second quarter.

The capital account recorded a significant surge after a lull in the preceding two quarters, driven by FII inflows and sharp rise in external commercial borrowings, short-term credits and overseas borrowings by banks, according to the RBI.

The capital account balance during the third quarter was higher at $12.06 billion, against $4.679 billion in the previous corresponding period. An accretion of $6.6 billion in the third quarter reversed the reserve draw-down of the second quarter. Invisible receipts rose 37.5 per cent, driven by transportation, software exports and other professional and business services.

International tourists traffic to India rose 25 per cent (18 per cent in April-December 2003).

Private transfers comprising primarily remittances from Indians working abroad, moderated from a high base of April-December 2003. Invisible payments grew 62 per cent on account of outbound tourist traffic, payments for transportation and other business services, such as business and management consultancy, engineering, technical and distribution services.

Expansion in merchandise imports and invisible payments turned the current account from surplus of $4.8 billion in April-December 2003 to a deficit of $7.4 billion in April-December 2004, pointing to a brightening of investment climate.

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