The Hindu Business Line : Oil price impact widens current account deficit

Chennai, June 30 Oil prices played spoilsport with the quarterly macro-economic balance sheet of the country released by the Reserve Bank of India today.

With the country importing 70% of its oil requirements and the near doubling of oil prices during the period under review – the fourth quarter (January – March 2008), it was obvious that the balance of trade would be in a deficit.

The impact of this was partially offset by the robust growth in ‘invisibles’ – (RBI shorthand for transactions that don’t pass through the customs gate – ie. earnings from software services and remittance incomes). The 30% growth in ‘invisibles’ (that comprises transactions in services such as software and inward remittances from Non-resident Indians), helped reduce the margin of the deficit.

In the fourth quarter of the last fiscal, the current account balance went into a deficit of $ 1 billion as against a surplus balance of $ 4.3 billion in Q4 of 2006-07. The current account deficit for the whole fiscal widened to $17.40 billion compared to nearly $ 10 billion in the earlier year.

Net foreign exchange earnings from software and other services during the last fiscal (2007-08) have risen by about 28% to $37 billion. Private transfers from individuals grew significantly at about 45% last fiscal to about $42.5 billion.

These comprise mainly inward remittances and local withdrawals from NRI accounts, as well as in smaller measure, what is brought as gold and silver in passenger baggage and donations and gifts given to religious and charitable institutions.

Capital account

The country’s capital account had a surplus of $109.57 billion in the last fiscal compared with a surplus of $46 billion in the previous fiscal. Foreign direct investments of $15.5 billion, portfolio investments of $29 billion and external commercial borrowings of about $22 billion were major components of capital inflows during the last fiscal.

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