A near doubling of remittances by non-resident Indians (NRIs) kept the current account deficit in check despite a widening of trade deficit. The country’s current account deficit accounts for roughly 0.5 per cent of its gross domestic product (GDP). In absolute terms, trade deficit increased to $21.7 billion in the second quarter of the current financial year as against $16.8 billion a year earlier, said RBI’s report on balance of payments (BoP) developments during July-September 2007 pasted on its official website.
Invisibles receipts rose 29.1 per cent in the September quarter as against 30.6 per cent in the corresponding quarter last year. The rise was mainly due to continued momentum in remittances from overseas Indians, software services, travel earnings and other professional services. Net invisibles was higher by 54.5 per cent at $16.19 billion in the September quarter as against $10.48 billion in the year-ago period primarily on account of a sharp acceleration in private transfers. Net private transfer receipts, mainly comprising remittances from Indians working overseas, showed an increase at $10.08 billion in the period under consideration as against $5.37 billion in the same period last year.
Net earnings
With global central banks, especially the US Fed, cutting key rates, Indian interest rates offer better returns, NRIs are bringing more money into the country to take advantage of the difference in interest rates prevailing in the global markets and domestic market. Net earnings from software services stood at $7.2 billion for the second quarter of 2007-08 as against $6.7 billion a year earlier.
The capital account surplus widened to $33.9 billion during the quarter from $8.7 billion a year earlier. Net portfolio investment stood at $10.9 billion as against $2.2 billion a year earlier. Net accretion to foreign exchange reserves on a BoP basis, excluding valuation, was significantly higher at $29.2 billion in the second quarter of 2007-08 as against $2.27 billion a year earlier led by strong capital inflows.
