The Balance of Payments (BoP) data release for 4QFY12 and FY12 displayed continued overall deficit. Exports growth slowed down while import growth was resilient resulting in highest ever trade deficit and CAD/GDP ratio for FY12 at 10.3% and 4.2% respectively.
- Invisibles comprising services exports, net income from abroad and remittances showed first signs of growth in FY12 after a hiatus of two years.
- While capital flows improved somewhat, this fell short to meet the expanded trade gap leaving continued overall BoP deficit for 3 consecutive quarters.
- The measures to ease restrictions on capital account seem to have been successful at the margin in attracting capital flow with NRI deposits rising by USD7b in 4QFY12.
- Early indicators of 1QFY13 point to continued BoP deficit with USD6b drawdown on forex reserves, USD120m FII outflow and near 8% INR depreciation.
- However, trade data for Apr-May 2012 reflect moderating trade growth with import composition pointing to moderate growth in oil bill while near halving of gold & silver imports.
- Thus, we expect FY13 CAD/GDP ratio to come down to 2.5%. However, attracting capital flow would be a challenge in the current investment climate and therefore we may still be left with an overall BoP deficit of USD10b in FY13.
- Invisibles comprising services exports, net income from abroad and remittances showed first signs of growth in FY12 after a hiatus of two years.
- While capital flows improved somewhat, this fell short to meet the expanded trade gap leaving continued overall BoP deficit for 3 consecutive quarters.
- The measures to ease restrictions on capital account seem to have been successful at the margin in attracting capital flow with NRI deposits rising by USD7b in 4QFY12.
- Early indicators of 1QFY13 point to continued BoP deficit with USD6b drawdown on forex reserves, USD120m FII outflow and near 8% INR depreciation.
- However, trade data for Apr-May 2012 reflect moderating trade growth with import composition pointing to moderate growth in oil bill while near halving of gold & silver imports.
- Thus, we expect FY13 CAD/GDP ratio to come down to 2.5%. However, attracting capital flow would be a challenge in the current investment climate and therefore we may still be left with an overall BoP deficit of USD10b in FY13.
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