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Economic Survey Analysis : Balance of Payments

Athar Imam Raza

An IAS aspirant must study the Economic Survey of the respective year. The Economic Survey is one of the most reliable sources released by the Government of India. Here, we have provided an analysis of India’s balance of payment statement and how they managed significantly to overcome the issue of huge current account deficits (CAD) in the recent years.

Balance of Payments of India

Current Accounts

  • Despite restraint in India’s export volume, India’s external sector position has been a snug, with the current account deficit (CAD) progressively toning convincingly from US$ 88.2 billion (4.8 per cent of GDP) in 2012-13 to US$ 22.2 billion (1.1 per cent of GDP) in 2015-16.
  • The current account deficit (CAD) further narrowed in the first half of 2016-17 to 0.3 per cent of GDP, while during the same period in 2016-17 (H1); sharp contraction in the trade deficit outweighed the decline in net invisible earnings.
  • The fall of international crude oil prices resulted in a decline in oil import spending by around 18 per cent, which together with a sharp decline in gold imports led to a reduction in India’s overall imports (on BoP basis).
  • The net services bill declined by 10 per cent in the first half of 2016-17 despite an increase in services receipts (4.0 per cent) as growth in services payments was higher (16 per cent) though the growth of receipts of software was marginal and financial services receipts reduced.
  • Unresponsive income conditions in source countries, particularly in the Gulf region due to a downward spiral in crude oil prices continued to weigh down on remittances by Indians employed overseas as private transfers moderated to US$ 28.2 billion in the first half of 2016-17 from US$ 32.7 billion in the first half of 2015-16.

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