result of the policy stance in OECD economies, characterized by aggressive monetaryeasing and near zero policy rates.
As a result of sharp decline in exports during the October-March of 2008-09, India’smerchandise exports, on a BoP basis, posted a growth of 5.4 per cent during 2008-09which is lower to 28.9 per cent in the corresponding period of the previous year.
Due to sharp fall in imports during Q4 of 08-09, import payments, on a BoP basis hasfallen down to 14.3 per cent during 2008-09 from high import growth of 35.2 per cent in2007-08.9.On a BoP basis, a sharp fall in exports and imports growth outpacing the growth inexports led to a widening of trade deficit to US$ 119.4 billion (or 10.3 per cent of GDP)in 2008-09 from US$ 91.6 billion (or 7.8 per cent of GDP) in 2007-08 Software receiptswhich are at US$ 47.0 billion had increased by 16.6 per cent during 2008-09 which wasin line with the estimate of the NASSCOM.10.Invisibles receipts which is at US$ 162.6 billion (14.0 per cent of GDP) witnessed aslower growth of 9.4 per cent during the financial year 2008-09 as compared with agrowth of 29.7 per cent in the previous year (US$ 148.6 billion or 12.7 per cent of GDP)mainly due to slow pace of growth in software services and private transfer receiptsalong with a decline in receipts under business services, travel and investment incomeaccount.
Miscellaneous receipts, excluding software exports, stood at US$ 30.5 billion in 2008-09(US$ 26.4 billion in 2007-08). In the capital account, inflows under foreign directinvestment (FDI) to India were higher during 2008-09 than the previous year reflectingthe attractiveness of India as a long-term investment destination. NRI deposits witnessedhigher inflows since September 2008 responding to the hikes in ceiling interest rates onsuch deposits.Table 1 sets out the balance of payments projections for 2009-10. It shows that trade deficit is tocontract to 8.2 per cent of GDP from 10.3 per cent last year, the current account deficit to shrink sharply to 0.8 per cent of GDP and capital account surplus to rise steeply to 5.5 per cent of GDP.There is to be a substantial build-up of reserves to the tune of US$57 billion by the end of 2009-10. This suggests that India would bequite comfortable this year on its external payments front.
Table 1: India's Balance of Payments: Projections for 2009-10 (US$ million)2006-072007-08 2008-092009-10(Projected)
% of GDP-6.8-7.8-10.3-8.2
Invisible receipts114558148604162556165562Invisible 62341740127297075513