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India- Balance of Payment analysis

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  • 1. BALANCE OF PAYMENTS - An Insight Prabhash Jha [email_address] IBS, Hyderabad
  • 2. Balance of Payments Account  It is an itemization of the factors behind the demand for and supply of a currency.  All transactions done by a resident of the country with the rest of the world. CURRENT ACCOUNT CAPITAL ACCOUNT OFFICIAL RESERVE ACCOUNT Export/Import Transfer Payments Factor Payments FDI/FII Portfolio Investments NRE / NRE A/Cs Gold Reserves Forex Reserves IMF Loans
  • 3. Summary Sheet
  • 4. CURRENT ACCOUNT
  • 5. Export Import & Trade Deficit
    • Import driven economy.
    • Service oriented growth.
    • Consumption driven pattern.
  • 6. Export Import & Trade Deficit
    • 2004-05 Vs 2003-04
    • Petroleum & related product, Iron ore, Capex items, Gold & silver imports gone up by more than 50%.
    • 2005-06 Vs 2004-05 and on wards
    •  Major contributors came from Capex items & Petroleum related products.
    A comparison of Import data
  • 7. Export Import & Trade Deficit 100.00 100.00 100.00 100.00   21.38 32.1 32.3 30.8 Others 8.05 7.6 10 8.8 Gold and Silver 4.30 5.7 6 7.4 Chemicals 4.14 6.1 8.6 9.1 Stones 25.97 15 11.5 12.7 Capital Goods 3.53 2.6 2.2 1.7 Iron and Steel 1.16 1.4 2.1 3.2 Edible Oil 31.48 29.5 27.3 26.3 Petroleum products 2006-07 2005-06 2004-05 2003-04   Imports Share (% of Import)  
  • 8. Services Exports  Sevice growth able to absorb the trade deficit to a larger extent.
  • 9. Export Statistics
    • % Contribution of Agr & allied items are diminishing.
    • Major reason lies on slow growth rates, requires immediate attention.
    100.00 100.00 100.00 100.00   15 11.63 8.49 5.66 Petroleium Items 70.4 72.80 74.52 77.76 Manufactured Items 5.2 5.26 6.37 4.04 Minerals Items 9.4 10.31 10.62 12.54 Agr & allied Items 2006-07 2005-06 2004-05 2003-04     Merchandised Export Share (% of Export) 9.4 9 7.5 8.5 Total GDP 11.00 9.8 9.60 8.50 Services 10.9 9.6 9.80 7.40 Industry 2.7 6 - 10.00 Agriculture & allied 2006-07 2005-06 2004-05 2003-04 YEAR Real GDP growth rates Statistics (In %)
  • 10. CAPITAL ACCOUNT
  • 11. Capital Account
    • Major contributions comes form FDI / FII / ECBs due to liberalisation on capital account transactions.
    • Initiatives taken towards capital account convertibility.
    ** 2007-08 (FDI) : April to July 2007. ** 2007-08 (FII) : April to 19th Oct 07. 15.93 5.48 9.33 10.18 FII (bn $) 6.61 19.53 7.72 6.05 FDI (bn $) 2007-08** 2006-07 2005-06 2004-05   FDI / FII Inflow Statistics
  • 12. OFFICIAL RESERVE ACCOUNT
  • 13. Reserve Usage  It is basically balancing amount in Balance of Payment accounts.
  • 14.
    • Building up of Forex Reserve to safeguard unforeseen future.
    • Enhancement of capacity of production through import of capex items.
    • Flow of FDIs / FIIs etc are gearing up to bring economic growth.
    • Hugh capital inflow in recent time have lead to rupee appreciation which checked up inflation and interest rates.
    Conclusion 253.32 239.96 221.51 219.75 206.11 200.70 196.90 191.92 145.11 135.57 Forex Res (In Bn $) Oct-07 (19 th Oct) Sep-07 Aug-07 Jul-07 Jun-07 May-07 Apr-07 Mar-07 Mar-06 Mar-05 Months
  • 15. Thank You