Indian Economy

RBI released balance of payments data for April-June 2020

Date : Sep 30, 2020

Sources of Variation in Foreign Exchange Reserves in India during April-June 2020

The Reserve Bank of India released balance of payments (BoP) data for April-June 2020 on its website (www.rbi.org.in). On the basis of these data, the sources of variation in foreign exchange reserves during April-June 2020 are detailed below.

Sources of Variation in Foreign Exchange Reserves: April-June 2020

During April-June 2020, there was an increase in the foreign exchange reserves, the sources of which are set out in Table 1.

Table 1: Sources of Variation in Foreign Exchange Reserves*
(US$ billion)
Items April-June 2020-21 April-June 2019-20
I. Current Account Balance 19.8 -15.0
II. Capital Account (net) (a to f) 0.1 29.0
a. Foreign Investment (i+ii) 0.2 18.8
(i) Foreign Direct Investment (FDI) -0.4 14.0
(ii) Portfolio Investment 0.6 4.8
    Of which:
            Foreign Institutional Investment (FII) 1.1 5.2
            ADR/GDR 0.0 0.0
b. Banking Capital 2.2 3.4
    Of which: NRI Deposits 3.0 2.8
c. Short term credit -0.2 2.0
d. External Assistance 4.1 1.5
e. External Commercial Borrowings -1.6 6.1
f. Other items in capital account -4.7 -2.8
III. Valuation change 8.0 3.0
Total (I+II+III) @
Increase in reserves (+) / Decrease in reserves (-)
27.9 17.0

*: Based on the old format of BoP which may differ from the new format (BPM6) in the treatment of transfers under the current account and ADRs/ GDRs under portfolio investment.
@: Difference, if any, is due to rounding off.

Note: ‘Other items in capital account’ apart from ‘Errors and Omissions’ include SDR allocation, leads and lags in exports, funds held abroad, advances received pending issue of shares under FDI and capital receipts not included elsewhere and rupee-denominated debt.

On a balance of payments basis (i.e., excluding valuation effects), foreign exchange reserves increased by US$ 19.8 billion during April-June 2020 as compared with US$ 14.0 billion during April-June 2019. Foreign exchange reserves in nominal terms (including valuation effects) increased by US$ 27.9 billion during April-June 2020 as compared with US$ 17.0 billion in the corresponding period of the preceding year (Table 2).

Table 2: Comparative Position of Variation in Reserves
(US$ Billion)
Items April-June 2020-21 April-June 2019-20
1 Change in Foreign Exchange Reserves
(Including Valuation Effects)
27.9 17.0
2 Valuation Effects
[Gain (+)/Loss (-)]
8.0 3.0
3 Change in Foreign Exchange Reserves on BoP basis
(i.e., Excluding Valuation Effects)
19.8 14.0
Note: Increase in reserves (+)/Decrease in reserves (-).
Difference, if any, is due to rounding off.

The valuation gain, reflecting the depreciation of the US dollar against major currencies and increase in gold prices, amounted to US$ 8.0 billion during April-June 2020 as compared with US$ 3.0 billion during April-June 2019.

(Yogesh Dayal)     
Chief General Manager

Developments in India’s Balance of Payments during the First Quarter (April-June) of 2020-21
Preliminary data on India’s balance of payments (BoP) for the first quarter (Q1), i.e., April-June 2020-21, are presented in Statements I (BPM6 format) and II (old format).

Key Features of India’s BoP in Q1 of 2020-21

  • India’s current account balance (CAB) recorded a surplus of US$ 19.8 billion (3.9 per cent of GDP) in Q1 of 2020-21 on top of a surplus of US$ 0.6 billion (0.1 per cent of GDP) in the preceding quarter, i.e., Q4 of 2019-20; a deficit of US$ 15.0 billion (2.1 per cent of GDP) was recorded a year ago [i.e. Q1 of 2019-20].
  • The surplus in the current account in Q1 of 2020-21 was on account of a sharp contraction in the trade deficit to US$ 10.0 billion due to steeper decline in merchandise imports relative to exports on a year-on-year basis.
  • Net services receipts remained stable, primarily on the back of net earnings from computer services.
  • Private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to US$ 18.2 billion, a decline of 8.7 per cent from their level a year ago.
  • Net outgo from the primary income account, primarily reflecting net overseas investment income payments, increased to US$ 7.7 billion from US$ 6.3 billion a year ago.
  • In the financial account, net foreign direct investment recorded outflow of US$ 0.4 billion as against inflows of US$ 14.0 billion in Q1 of 2019-20.
  • Net foreign portfolio investment was US$ 0.6 billion as compared with US$ 4.8 billion in Q1 of 2019-20 as net purchases in the equity market were offset by net sales in the debt segment.
  • With repayments exceeding fresh disbursals, external commercial borrowings to India recorded net outflow of US$ 1.1 billion in Q1 of 2020-21 as against an inflow of US$ 6.0 billion a year ago.
  • Net inflow on account of non-resident deposits increased to US$ 3.0 billion from US$ 2.8 billion in Q1 of 2019-20.
  • There was an accretion of US$ 19.8 billion to the foreign exchange reserves (on a BoP basis) as compared with that of US$ 14.0 billion in Q1 of 2019-20 (Table 1).
Table 1: Major Items of India’s Balance of Payments
(US$ billion)
April-June 2020 P April-June 2019
Credit Debit Net Credit Debit Net
A. Current Account 122.4 102.6 19.8 160.7 175.7 -15.0
1. Goods 52.3 62.3 -10.0 82.7 129.5 -46.8
  Of which:
          POL 4.9 13.1 -8.3 11.1 35.4 -24.2
2. Services 46.8 26.3 20.5 52.2 32.1 20.1
3. Primary Income 5.1 12.8 -7.7 5.8 12.1 -6.3
4. Secondary Income 18.2 1.2 17.0 20.0 2.0 18.0
B. Capital Account and Financial Account 126.8 146.1 -19.3 138.3 123.7 14.6
  Of which:
Change in Reserves [Increase (-)/Decrease (+)] 0.0 19.8 -19.8 0.0 14.0 -14.0
C. Errors & Omissions (-) (A+B) 0.5 -0.5 0.4 0.4
P: Preliminary
Note: Total of subcomponents may not tally with aggregate due to rounding off.

(Yogesh Dayal)
Chief General Manager

Categories: Indian Economy

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