India posts BOP surplus in Q3

India posts BOP surplus in Q3
REUTERS

MUMBAI, MAR 28: India’s big balance of payments surplus in the October-December quarter reflects a large inflow of overseas loans and some robust export growth, analysts said.

Data released on Wednesday by the Reserve Bank of India (RBI) showed a surplus of $4.17 billion, a sharp turnaroud from the $413 million deficit in the three months to September. It was also well above the balance of payments surplus of $2.1 billion posted in October-December 1999.

“This is on account of the IMD inflow, which has negated the impact of high oil prices,” Aashish Pitale, head of research at JP Morgan, said. “At the end of the (2000/01 fiscal) year, we should have an overall surplus of $6.5-7.0 billion,” he said.

During the quarter, India raised $5.5 billion from the issue of Millennium Deposits (IMD) to expatriates to defend the rupee after it hit all-time lows of 46.92 to the dollar in October. The rupee lost seven per cent in 2000, but has sincerecovered, supported by foreign investment and the IMD inflows. It was steady around 46.62 to the dollar on Wednesday morning.

Reflecting the IMDs, overseas loans in the quarter surged to a net $4.96 billion from $276 million in the previous quarter.

The RBI said the current account deficit was $469 million in the third quarter of fiscal 2000/01 (April-March), compared with a $629 million shortfall a year earlier. The current account deficit for July-September was revised down to $1.43 billion from its earlier figure of $1.673 billion.

STRONG EXPORT GROWTH: Economists said strong export growth so far this year had also helped mitigate the impact of high global crude oil prices. Exports grew at a scorching pace of 21 per cent year-on-year in April-January, taking some of the steam out of a surge in oil import costs to a third of the total import bill after global crude oil prices hit decade highs over $35 a barrel in October.

Government officials estimate net oil imports in 2000/01 at $15.5 billion, compared with last year’s $12.3 billion. But despite the strong exports growth seen so far in 2000/01, a Reuters poll of economists earlier this month forecast the trade deficit for the year at $ 17 billion, steady with 1999/2000.

And economists said the trade deficit could worsen next year as the slowdown in the United States and other markets dampens demand for India’s exports.

Software exports have so far not been severely affected by the global technology sector downturn, but economists expect its heavy dependence on US markets will tell in the longer term.

Software exports are forecast at $6.24 billion in the fiscal year ending on March 31, up from four billion dollars in 1999/00.

Economists also said a reversal of the slump in the domestic manufacturing sector may lead to more imports, as some production inputs are imported.