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India's balance of payments surplus eases in 2000-01

India's balance of payments surplus fell in the financial year to March, mainly because of foreign portfolio investors pulling out, data released by the central bank on Friday showed.

The current account deficit also shrank, a development that analysts attributed to a fall in non-oil imports due to the slowing of the economy.

The Reserve Bank of India said the current account deficit fell sharply in 2000-01 to $2.26 billion from $4.7 billion in the previous year.

The current account, which is a measure of the country's flow of services and goods, showed a surplus for the January-March quarter of $772 million compared with a deficit of $1.160 billion in the same period last year.

The current account showed a deficit of $171 million in October-December 2000.

"I expect current account deficit to fall to $1 billion in 2001-02, even though exports are not expected to grow at the pace they did last year," said Sanjeet Singh, analyst at ICICI Securities and Finance Company (I-Sec).

"Given the industrial slowdown, non-oil imports will fall even further."

India's industrial output growth in April slumped to 2.7 per cent from 6.5 per cent in the same month a year earlier, while the infrastructure sector index was down 0.5 per cent in May compared to a growth of eight per cent a year earlier.

Analysts said last year's 20 per cent export growth helped cushion the surge in global oil prices to 10-year highs hit in October last year. Oil and oil products currently account for almost a third of India's merchandise imports.

But this year exports are set to decline due to a sluggish global economy.

"In the current year it is unlikely exports will sustain that pace and we will be happy with a 5-8 per cent rise," said Tabassum Inamdar, strategist at Kotak Securities.

BALANCE OF PAYMENTS COMFORTABLE

Slower capital flows, especially portfolio flows, impacted last year's balance of payments surplus which narrowed to $5.86 billion in 2000-01 from $6.40 billion a year earlier.

Central bank data showed that portfolio investments fell to $1.083 billion from $3.024 billion a year ago but analysts said good portfolio inflows in the current year was likely to help.

Foreign funds have so far bought nearly $800 million between April and June so far, compared to $335.3 million in the year-ago period, data from the capital market regulator showed.

Last year, a $5.5 billion overseas deposit issue from the State Bank of India balanced the slowing capital flows from foreign investors.

"This year the BoP looks comfortable and nobody is talking about outflows," Singh of ICICI-Securities said.

For the January-March quarter, the balance of payments showed a surplus of $3.12 billion compared with $3.32 billion in the year ago period. The balance of payments showed a surplus of $4.169 billion in October-December 2000.

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