Marked improvement in current account balance

By S. Gopalan

CHENNAI, JUNE 29. The year 2000-01 closed on a satisfactory note as regards the country's balance of payments position thanks to the large proceeds from the millennium bonds and a substantial fall in the trade deficit.

Under current account, a robust increase in exports and a slower rise in imports helped bring down the trade gap. This has happened in the face of rising POL import value with the OPEC effecting a steep hike in oil prices.

Merchandise exports rose by $7.4 billion to $44.9 billion in 2000-01 while imports went up by $4 billion to $59.3 billion in the previous year. The trade gap thus came down to $14.4 billion from $17.8 billion previously. But invisibles were lower by $1 billion in the latest year at $12.1 billion as compared to the previous year. Earnings from services declined to $2.8 billion from $4 billion on a net position. The net position in the miscellaneous category came down to $3.3 billion from $3.4 billion. Private transfers on the other hand slightly edged up and investment income(net) declined further to minus $3.8 billion from a negative $3.6 billion. Thus the current account balance improved to (-) $2.3 billion in 2000-01 from (-) $4.7 billion in the previous year. This is the lowest in the past four years. The current account deficit was a high $5.5 billion in 1997-98 which declined to $4 billion in the next year.

On the capital account, foreign investment declined sharply to $2.9 billion from $5.1 billion with a $2 billion drop in portfolio investments while FDI inflow was maintained at $2.3 billion. Loans shot up to $4.5 billion from $1.6 billion mainly because of the Millennium bonds. Banking capital nosedived to a mere $180 million from $2.7 billion with an outgo assets of $1.47 billion against an inflow of $790 million. Non-resident deposits dipped to $1.6 billion from $2.1 billion. The capital account showed a smaller surplus at $7.5 billion against $10.8 billion. The overall balance was lower at $5.8 billion in 2000-01 against $6.4 billion in the previous year.

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Section  : Business
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