Despite lower trade deficit, current account deficit, which stood at $12.6 billion in the second quarter of 2009-10, was almost at the same level as last year, mainly on account of lower net invisibles surplus.

?The invisibles surplus, however, continued to be driven by private transfers and software exports,? the Reserve Bank of India (RBI) said in its data released on balance of payments (BoP) on Thursday.

Merchandise trade deficit remained lower at $58.2 billion during April-September 2009 as against $64.4 billion in the year-ago period, mainly on account of decline in oil import.

Lower net invisible surplus, at $39.6 billion, was led by lower software services and drop in business services and investment income.

The central bank noted that the BoP surplus stood at $9.4 billion for the July-September quarter as against $4.7 billion a year ago. The decline in exports, which started since October 2008, continued during the second quarter of 2009-10.

?On a BoP basis, India?s merchandise exports tanked 21% in second quarter of 2009-10 as against an increase of 39.6% in Q2 of 2008-09. Import payments, on a BoP basis, dropped 19.6% in the second quarter of 2009-10 as against a higher growth of 54.8% in the corresponding period last year,? the RBI said.

At the same time, the country?s trade deficit widened to $32.2 billion during the quarter from $26 billion in the previous three months.

Both gross capital inflows and outflows remained strong during Q2 of 2009-10.

The gross capital inflows to India during the second quarter of 2009-10 amounted to $98.1 billion as against $90 billion in Q2 of 2008-09, mainly on account higher foreign investment inflows of $55.8 billion.

Net capital flows were also substantially higher at $23.6 billion in Q2 of 2009-10 than that of $7.1 billion in the corresponding period of 2008-09 fiscal mainly due to large net foreign investment inflows and SDR allocations by the IMF during the quarter.

Foreign exchange reserves, on BoP basis, excluding valuation, have shown an accretion of $9.4 billion in Q2 of 2009-10 as against a decline in reserves of $4.7 billion in Q2 of 2008-09, which can again be attributed to large capital inflows and SDR allocations by the IMF.

The foreign exchange reserves (including the valuation effects) increased by $ 29,293 million during April-September 2009 as against a decline of $23,387 million during April-September 2008

On BoP basis (i.e., excluding valuation effects), the foreign exchange reserves increased by $ 9,533 million during April-September 2009 quarter as against a decline of $ 2,499 million a year-ago. The valuation gain, reflecting the depreciation of the US dollar against the major currencies, accounted for $ 19,760 million during April-September 2009 as compared with a valuation loss of $ 20,888 million during April-September 2008. Accordingly, valuation gain during April-September 2009 accounts for 67.5 % of the total increase in foreign exchange reserves.