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Mumbai: Invisibles, in particular, private remittances have contributed significantly to the current account.
Net invisibles inflows, comprising mainly of private transfer remittances and services increased from $1.6 billion in 1991-92 to $89.6 billion in 2008-09, said the Reserve Bank of India, in its report on the foreign exchange reserves, released on Thursday India’s current account balance which was in deficit at 3% of the GDP in 1990-91 turned into a surplus of 0.7% in 2001-02 and further a surplus of 1.2% in 2002-03.
A surplus of $14.1 billion was posted in the current account during the financial year 2003-04, driven mainly by the surplus in the invisibles account.
However, this was not sustained during 2004-05, with the current account posting a deficit of $2.5 billion, driven mainly by the surge in oil prices in the international market.
During 2005-06 and 2006-07, current account deficit widened further and remained around 1% of GDP, driven mainly by strong import demand, both oil and non-oil.
The current account deficit further increased to $17 billion or 1.5% of GDP in 2007-08 and again to $29.8 billion or 2.6% of GDP in 2008-09 led by high import payments.
The report further revealed that the sources of reserves accretion during the entire reform period from 1991 onwards has been facilitated by an increase in net foreign direct investment (FDI), from $129 million in 1991-92 to $17.5 billion in 2008-09.
FII investments in the Indian capital market, which commenced in January 1993, have also shown a significant increase over the subsequent years, the data showed.
“Cumulative net FII investments increased from $1 million at end-March 1993 to $ 51.6 billion at the end of March 2009. The net outflows of $15 billion by FIIs led to decline in cumulative portfolio stock to $79.4 billion at end of March 2009 from $94.5 billion at the end of March 2008,” the report said.
Meanwhile, outstanding NRI deposits increased from $14 billion at end of March 1991 to $43.7 billion as at the end of March 2008, to $41.3 billion, at the end of March 2009. Talking about the current account, India’s exports, which were $18.3 billion during 1991-92 increased to $166.2 billion in 2007-08, the data said.
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