Improvement on BoP front

By our Special Correspondent

CHENNAI, APRIL 2. There is good news on the balance of payments front thanks to an improvement in the current account component as well as in the capital account in the third quarter of the current year (October-December).

The current account deficit in Q3 is lower at $629 million as compared to a negative $1,452 million in the previous quarter and $2,006 million in the first quarter.

These data are put out by the Reserve Bank of India in its March 28 bulletin.

The improvement has been facilitated by a substantial increase in invisibles by $3,175 million mainly on account of a steady rise in private transfers (mainly remittances) to $3,172 million (net) in the third quarter from $3,018 million in the previous quarter and $ 2,744 million in the first quarter and services to $667 million in Q3 from a negative balance of $125 million in Q2 and $161 million in the first quarter.

But the balance of trade continues to be a problem area. The trade deficit which was $4,157 million in the first quarter and $3,374 million in Q2 went up to $3,804 million in the third quarter. The total capital account showed a surplus of $2,171 million in the latest quarter against $1,382 million in July- Sept. and $2,817 million in April-July 1999.

Net foreign investments slowed but banking capital including non- resident deposits showed a comfortable rise.

Foreign direct investment rose from a surplus of $452 million in Q1 to $648 million in the second quarter but came down to $400 million in Q3.

The additions to portfolio investments have been somewhat erratic. These were as high as $899 million and $450 million in the first two quarters but slowed to a surplus of $346 million in the latest quarter.

Accretions to non- resident deposits have been fairly good. These were much higher at $611 million in the first quarter but dipped to $321 million in Q2 but rose to $558 million in the quarter.

The overall balance was thus a surplus of $2102 million in the third quarter against a negative balance of $513 million in the second quarter and again a surplus of $1458 million in the first quarter.

Taking a cumulative picture for the nine month period , the current account deficit shows an improvement of more than $200 million at $ 4290 million in April- December 1999 against $4,087 million in the corresponding period in 1998. The capital account shows an improvement of $1,369 million at $5 billion.

Allowing for errors and omissions of plus $764 million against a positive $211 million in April-December 1998, there is an overall a surplus of $3 billion in the current nine month period against little less than a billion dollars in the like period in 1998.

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