Developments in India’s Balance of Payments during Q4: 2023-24
The balance of payments (BoP) is a crucial economic indicator that provides insight into a country’s economic transactions with the rest of the world. For India, the fourth quarter (Q4) of the fiscal year 2023-24 presented a notable shift in economic trends, highlighting both improvements and challenges. This blog post aims to provide a comprehensive overview of these developments, targeting individual taxpayers and business owners.
Key Features of India’s BoP in Q4: 2023-24
- Current Account Surplus
- India recorded a current account surplus of US$ 5.7 billion (0.6% of GDP) in Q4:2023-24. This is a significant improvement compared to the deficit of US$ 8.7 billion (1.0% of GDP) in the previous quarter and US$ 1.3 billion (0.2% of GDP) a year ago.
- The reduction in the merchandise trade deficit, which stood at US$ 50.9 billion, contributed significantly to this surplus.
- Trade and Services
- The merchandise trade deficit decreased from US$ 52.6 billion a year ago to US$ 50.9 billion.
- Services exports experienced a 4.1% year-on-year growth, driven by rising exports of software, travel, and business services. Net services receipts increased to US$ 42.7 billion from US$ 39.1 billion a year ago.
- Primary Income and Private Transfers
- Net outgo on the primary income account, primarily due to investment income payments, rose to US$ 14.8 billion from US$ 12.6 billion a year earlier.
- Private transfer receipts, mainly from remittances by Indians working overseas, surged by 11.9% to US$ 32.0 billion.
- Financial Account
- Net foreign direct investment (FDI) inflows were US$ 2.0 billion, down from US$ 6.4 billion a year ago.
- Foreign portfolio investment saw a net inflow of US$ 11.4 billion, contrasting with the net outflow of US$ 1.7 billion in the same period of the previous year.
- External commercial borrowings net inflows amounted to US$ 2.6 billion, up from US$ 1.7 billion a year ago.
- Non-resident deposits recorded a higher net inflow of US$ 5.4 billion compared to US$ 3.6 billion a year earlier.
- Foreign Exchange Reserves
- India’s foreign exchange reserves saw an accretion of US$ 30.8 billion in Q4:2023-24, a significant increase from the US$ 5.6 billion accretion a year ago.
BoP During 2023-24
- Current Account Deficit: India’s current account deficit for the entire fiscal year 2023-24 moderated to US$ 23.2 billion (0.7% of GDP) from US$ 67.0 billion (2.0% of GDP) in the previous year.
- Net Invisibles Receipts: These were higher in 2023-24, mainly due to increased services and transfers.
- Portfolio Investment: Recorded a net inflow of US$ 44.1 billion, reversing the net outflow of US$ 5.2 billion from the previous year.
- Net FDI Inflows: Declined to US$ 9.8 billion from US$ 28.0 billion in 2022-23.
- Foreign Exchange Reserves: Accumulated US$ 63.7 billion during 2023-24.
Conclusion
The developments in India’s balance of payments during Q4:2023-24 indicate a positive shift towards economic stability. The current account surplus, reduced trade deficit, and increased foreign exchange reserves are promising signs. However, the decline in net FDI inflows highlights areas needing attention. Individual taxpayers and business owners can glean valuable insights from these trends to inform their financial decisions and strategies.
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