India - Balance of payments

India Balance Of Payments 1363
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India has a chronic deficit on current accounts. What bridges the gap between payments and receipts is mainly external aid (especially nonproject assistance), tourism earnings, and remittances from Indians working abroad. Heavy imports of food grains and armament purchases caused a decline in India's foreign exchange reserves in the mid-1960s. An economic recovery from 1968–69, however, eased the problem, and by September 1970, foreign exchange reserves amounted to $616 million, as compared with $383 million by December 1965. Reserves declined to $566 million by the end of 1972 but increased to $841 million as of December 1975, despite massive deficits on current accounts, attributable to the quadrupling of oil import prices during 1973–74. Foreign exchange reserves declined from $6,739 million at the end of 1979 to $3,476 million as of November 1982 but subsequently rose to $5,924 million by March 1987. The Gulf War crisis worsened the ratio of current account deficit to GDP. Foreign exchange reserves plummeted because of export losses in Kuwait, Iraq, and other nations. Remittances from Indian workers fell, and sudden price increases for oil imports caused an estimated loss to India of over $2.8 billion in earnings. By November 1993, however, India's foreign exchange reserves had risen to $8.1 billion, the highest level since 1951. A substantial reduction in the trade deficit, increased inflows from foreign institutional investors, a stable exchange rate, and improved remittances all contributed in the recovery of reserves. Although export growth remained strong, the current account deficit tripled from 1993–94 to 1995–96. The increase was attributed to a continuing surge in imports and higher debt service requirements. However, between 1995 and 1998 the current account deficit shrank to about 1% of GDP due to increased textile exports and a liberalizing trade regime. India's total external debt in 2001 was estimated at $100.6 billion. In 2000, the external debt-GDP ratio stood at around 20.7%, down from 41% in 1991/92. In the early 2000s, India's exports to East and Southeast Asia increased, including to Japan and South Korea. High growth rates were registered for textiles, chemicals and related products, engineering goods, and leather and manufactures.

The US Central Intelligence Agency (CIA) reports that in 2001 the purchasing power parity of India's exports was $44.5 billion while imports totaled $53.8 billion resulting in a trade deficit of $9.3 billion.

The International Monetary Fund (IMF) reports that in 2000 India had exports of goods totaling $43.1 billion and imports totaling $55.3 billion. The services credit totaled $18.3 billion and debit $19.9 billion. The following table summarizes India's balance of payments as reported by the IMF for 2000 in millions of US dollars.


Current Account -4,198
Balance on goods -12,193
Balance on services -1,582
Balance on income -3,876
Current transfers 13,453
Capital Account
Financial Account 9,616
Direct investment abroad -335
Direct investment in India 2,315
Portfolio investment assets
Portfolio investment liabilities 1,619
Other investment assets -1,136
Other investment liabilities 7,152
Net Errors and Omissions 670
Reserves and Related Items -6,087

User Contributions:

Palkesh Asawa
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gaurav jain
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Fernandez, Saul Rick
Im doing my thesis, and this information is great to do some job in it, thank you
good source of information but still need to be updated to years of 2009
this is really good information, will helpful for studies
Trishna Malik
i want to know how is government tackling the Balance of payment crisis in the present seen??Any developments done in this area by government??

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