India sitting on a Thorny Throne

Posted by Vijay Shekar on

India sitting on a Thorny Throne

Hello everyone today I am writing about the Indian Economy again after the quarterly growth rate of 8.2% was declared the highest in 15 quarters. But according to many experts, the Indian Economy is not doing that well as it seems. The rupee touched the 71 line against the dollars and the loan default has risen to 9 lakh crore.

Current account deficit which means an excess of a country’s import of goods and services over its exports- touches nearly 2% of the GDP as oil prices rise and electronic imports surge. This has been a blow to the Rupee which is already weakening. 

India’s current account in the balance of payments (BOP) ended in a deficit of $ 13.5 billion or 2 per cent of GDP in the quarter ended December 2017, up from $ 8.0 billion or 1.4 per cent of GDP in the quarter ended December 2016 and $ 7.2 billion (1.1 per cent of GDP) in the preceding quarter ended September 2016, according to the preliminary data released by the Reserve Bank of India. 

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The other major component of CAD services. Net services receipts increased by 17.8 per cent on a year on year (YoY) basis mainly on the back of a rise in net earnings from software services and travel receipts. Also, private transfer receipts, mainly representing remittances by Indians employed overseas, amounted to $ 17.6 billion. They rose 16 per cent from their level a year ago. 

In the capital account which comprises foreign investments and overseas borrowings and NRI deposits, while net foreign direct investment at $ 4.3 billion in Q3 of 2017-18 was lower than $ 9.7 billion in Q3 of 2016-17,portfolio investment recorded net inflow of $ 5.3 billion in Q3 of 2017-18- as against an outflow of $ 11.3 billion in Q3 last year – on account of net purchases in both the debt and equity markets. Net NRI deposits amounted to $ 3.1 billion in Q3 of 2017-18 as against net repayment of $ 18.5 billion a year ago.

The overall balance of payments, including the position in the current account and capital account, ended in a surplus of $9.4 billion on account of a $22 billion surplus in the capital account. 

Though the Sensex has continuously risen and touched the 38,650 marks the increase in the BOP doesn’t show good signs. Well, defence deals worth 38000 crores have been finalised making sure that the dollar will see the 72 line this week the only positive being the Gold sector where there has been only a minimum increase.
This is a very tricky situation for any country to be in and does remind one of the 1991 economic depression in the country. This time hope liberalisation has done the harm as consequences seem dire.

Thank You all.

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