The Hindu Business Line : Current account deficit narrows to $3.8 b in Q3; oil imports firm

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The net invisibles grew by 31.3 per cent to $8.17 billion from $6.29 billion.
The capital account flows fell by $872 million in the third quarter due to the repayment of $5.5 billion through IMD.

Mumbai , March 31

The country's current account deficit has narrowed to $3.85 billion in the quarter ended December 30, 2005, against $5.44 billion in the corresponding quarter of the previous fiscal and $5.05 billion in the previous quarter of the current year.

The trade deficit for the third quarter of the current fiscal marginally widened to $12.02 billion from $11.73 billion in the corresponding period of the previous year. India's imports were $38.429 billion, while exports amounted to $26.4 billion.

Import payments showed a moderate growth of 17 per cent during the quarter, primarily due to a strong base effect since imports had grown by 55.4 per cent in the corresponding quarter of 2004-05. Oil import during this period remained steady, however non-oil imports witnessed a slowdown.

The net invisibles grew by 31.3 per cent to $8.17 billion, from $6.29 billion, reflecting the pace of growth in travel earnings, business, professional and software services and remittances. The growth in the net invisibles despite the trade deficit helped in considerable reduction of the current account deficit.

According to the apex bank, "the spurt in remittances from overseas Indians, represented in private transfers, could be possibly due to the ploughing back of a part of the redemption proceeds of India Millenium Deposits (IMDs)."

Capital account flows

The capital account flows fell by $872 million in the third quarter due to the repayment of $5.5 billion through IMD, the moderation in FII inflows because of selling pressures in October-November and the build up of foreign currency assets in the banks' portfolios.

However, inflows in the form of foreign direct investment and NRI deposits remained steady during this period, the RBI said in a statement.

9-month figures

For the first nine months of the fiscal, the current account deficit has widened to $13.47 billion, from $5.92 billion in the corresponding period of the previous year.

The capital account flows for the same period have also dropped to $15.25 billion from $19.45 billion. The balance of payment for the nine months showed an increase of $1.78 billion (excluding valuation effect).