The balance of payments position remained comfortable during 2007-08. The merchandise trade deficit, on a balance of payments basis, widened from $63.2 billion in 2006-07 to $ 90.1 billion in 2007-08. As proportion to GDP, the trade deficit increased from 6.9 % to 7.7 % cent. According to the Reserve Bank of India?s first quarterly review of Macroeconomic and monetary developments net surplus under invisibles (services, transfers and income taken together) expanded to $ 72.7 billion in 2007-08 from $ 53.4 billion in 2006-07.
The net invisible surplus offset 80.7 % of the trade deficit during 2007-08 as compared with 84.5 % during 2006-07. During 2007-08, the widening of the trade deficit, mainly led by imports, resulted in a widening of current account deficit to $17.4 billion (1.5% of GDP) from $9.8 billion (1.1 % of GDP) in 2006-07.
The current account deficit was financed by capital flows which remained large during 2007-08. The strong momentum observed in FDI inflows during the year 2007-08 continued during 2008-09, with inflows during April-May 2008 amounting to $7.7 billion. In respect of FIIs, however, there were net outflows of $ 5.6 billion up to July 11, 2008. NRI deposits recorded net inflows of $ 292 million during April-May 2008 as against net outflows of $ 559 million during April-May 2007. According to the data released by the directorate general of commercial intelligence and statistics (DGCI&S), India?s merchandise exports posted a growth of 21.7 % during April-May 2008 (24.2 per cent during April-May 2007). Imports grew at 31.8 % as compared with 37.9 % a year ago.
Non-oil imports recorded an increase of 24.6 % (43.8 % a year ago); oil imports increased by 48.6 % during April-May 2008 as against 25.7 % in April-May 2007. Merchandise trade deficit during April-May 2008 increased to $ 20.7 billion from $13.9 billion a year ago. Foreign exchange reserves increased by $ 110.5 billion during 2007-08 to $ 309.7 billion. As on July 18, 2008, India?s foreign exchange reserves were $ 307.1 billion.
The growth in broad money (M3), year-on-year (y-o-y), was 20.5 per cent (Rs. 7,04,046 crore) on July 4, 2008 as compared with 21.8 per cent (Rs. 6,17,118 crore) a year ago. The aggregate deposits of banks, y-o-y, expanded by 20.7 % (Rs.6,07,668 crore) on July 4, 2008 as compared with 23.1 % (Rs. 5,50,653 crore) a year ago. Non-food credit by scheduled commercial banks (SCBs) expanded by 25.9 % (Rs.4,85,709 crore), y-o-y, as on July 4, 2008 as compared with 24.6 % (Rs.3,69,109 crore) a year ago.
Growth in reserve money, y-o-y, was 26.5 % on July 18, 2008 as compared with 29.0% a year ago. Adjusted for the first round impact of the hike in the cash reserve ratio, reserve money growth was 18.4 % as compared with 21.6 % a year ago.