19-02-2013, 03:48 PM
OIL, GOLD AND SILVER PRICES CONTRIBUTE TO MODEST RISE IN
CURRENT ACCOUNT DEFICIT
ABSTRACT
As India integrates into a seamless world, it cannot remain impervious to
developments abroad. The unfolding of the Euro zone crisis and uncertainty surrounding the
global economy have impacted the Indian economy causing drop in growth, higher current
account deficit and declining capital inflows. Export growth has slowed in the third quarter of
fiscal 2011-12, while imports remained high, partly because of continued high international
oil prices. At the same time, foreign institutional investment flows have declined, straining
the capital account and the rupee exchange rate. These and other details emerged in the
Economic Survey 2011-12, presented by the Finance Minister, Shri Pranab Mukherjee in Lok
Sabha today.
In the current fiscal 2011-12, on month-to-month basis the rupee depreciated by 12.4
per cent from 44.97 per US dollar in March 2011 to 51.34 per US dollar in January 2012.
Rupee reached a peak of 43.94 on July 27, 2011, and lowest at 54.23 per US dollar on
December 15, 2011 indicating a depreciation of 19 per cent.
During fiscal 2011-12, forex reserves reached all time high level of US $ 322.2 billion
at end August 2011. However, it declined to US $ 292.8 billion at end January 2012
indicating a fall of US $ 12.0 billion from US $ 304.8 billion at end-March,2011. The decline
in reserves is partly due to intervention by the Reserve Bank of India to stem the slide of
Rupee against US dollar.
India’s external debt stock increased by US $ 20.2 billion (6.6 per cent) to US $ 326.6
billion at end-September 2011 vis-à-vis US $ 306.4 billion at end-March 2011, primarily on
account of higher commercial borrowings and short-term debt. The long-term external debt at
US $ 255.1 billion accounted for 78.1 per cent of the total external debt while the short-term
debt was at 21.9 per cent. Government (sovereign) external debt stood at US $ 79.3 billion,
while non-Government debt amounted to US $ 247.3 billion at end-September 2011.
The current account deficit was US $ 32.8 billion (3.6 per cent of GDP) in H1 of
2011-12, as compared to US $ 29.6 billion (k3.8 per cent of GDP) during the corresponding
period of 2010-11. This was mainly on account of the trade deficit of US $ 85.8 billion (9.4
per cent of GDP) due mainly to increase in international prices of imported commodities viz
oil and gold and silver. As per the latest data, export growth has slowed down in recent
months while imports remained at elevated level, resulting in higher trade deficit.
The momentum gained in exports and imports during 2010-11 continued during the
first half (H1-April-September 2011) of the current fiscal with exports recording 40.6 per
cent and imports 34.3 per cent increase during H1 of 2011-12 over the corresponding period
last year. Supportive government policy, diversification in terms of higher value-added
products in engineering and petroleum sectors and destinations across developing economies
were responsible for resilient export performance.