Balance of payments records surplus for 3rd quarter

The balance of payments recorded a surplus for a third straight quarter in April-June on the back of higher dollar flow into the capital markets paving the way for a more stable rupee.

The balance of payments registered a surplus of $11.2 billion in the first quarter up from $7.1 billion in the last quarter of the FY14, according to Reserve Bank of India (RBI) data released on Monday. Last year, the balance of payments was $300 million in deficit.

The country has seen a surge in short-term portfolio investment in stocks and bonds this year as investor confidence improved on expectations of a stable government led by Prime Minister Narendra Modi.

Foreign portfolio inflow has touched $30 billion so far this year compared with just $12 billion for the whole of 2013, when the rupee had depreciated to a record low on concerns about the wide current account deficit (CAD) and sluggish economic growth. In the April-June quarter of 2014, portfolio inflow stood at $12.4 billion compared with an outflow of $200 million a year ago.

CAD for April-June stood at $7.8 billion (1.7 per cent of GDP), sharply higher than $1.3 billion in January-March but narrowing from $21.8 billion (4.8 per cent of GDP) in the year-ago period.

"It is hard to say how much the non-oil, non-gold imports will go up once recovery picks up," said Indranil Pan, chief economist, Kotak Mahindra Bank. "Also, global risk aversion could put pressure on these portfolio inflow, which are fickle in nature. So, overall one has to have a relative caution on the current account deficit."

CAD touched a record high of around $88 billion in 2012-13 driven by a massive surge in gold imports, which rose to $7 billion in the April-June period of 2014 from $5.3 billion in the previous quarter. But there were less than half imports totalling $16.5 billion in the June quarter a year ago.