The Hindu Business Line : Current account balance turns negative again

THE current account balance, which turned in a modest surplus in the quarter ended March 2005, has turned negative again. For the quarter ended June 2005, current account deficit was about $6.2 billion.

Robust increases in both merchandise imports and payments for services received more than neutralised the significant increase in merchandise exports, according to Reserve Bank of India statistics.

Growth in merchandise exports was also moderate at about 22 per cent year-on-year compared to 34 per cent recorded in the quarter ended June 2004.

Gross receipts of invisibles grew at 46 per cent, reflecting the growth in software services exports, travel earnings and remittances from overseas Indians.

The RBI has said that buoyant economic activity is behind the 78 per cent increase in non-oil imports, which far outstripped the oil bill that rose by 31 per cent.

According to the apex bank, crude oil prices averaged $49.2 per barrel in April-June 2005, rising by 44 per cent over the average price for corresponding previous period. Oil imports rose 13.4 per cent in volume terms.

Payments for services surged 75 per cent. The RBI indicated that growth in outbound tourist traffic, transportation, insurance payments and business services such as consultancy was behind the increase in payments.

Despite this surge in payments, net invisibles were still positive and rose by 14 per cent over the previous year. Only the sharp expansion in imports took the current account into the deficit territory.

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