28061337530502balance of payments - 280613

8/9/2019 28061337530502Balance of Payments - 280613

1/5

Anand Rathi Shares and Stock Brokers Limited (hereinafter “ARSSBL”) is a full service brokerage and equities research firm and the views expressed therein are solely ofARSSBL and not of the companies which have been covered in the Research Report. This report is intended for the sole use of the Recipient and is to be circulated only withinIndia and to no countries outside India. Disclosures and analyst certifications are present in Appendix.

Anand Rathi Research India Equities

India I Equities

Economy

Quarterly

Fig 1 – CAD narrows on lower imports

(US$ bn) 4QFY13 FY13Current a/c balance -18.2 -88.2

Merchandise balance -45.6 -195.7

Invisible balance 27.5 107.5

Services balance 17.0 64.9

Software 17.1 63.5

Private Transfers 15.8 64.3

Capital a/c balance 20.5 89.3

FDI 5.7 19.8

Portfolio investment 11.3 26.9

ECBs 4.2 8.5

Short-term credit 4.5 21.7

Banking capital -3.6 16.6

NRI deposits 2.8 14.8

Other capital -2.1 -5.0

Overall BoP balance 2.7 3.8

Source: The Reserve Bank of India

Fig 2 – Capital a/c surplus also narrows

-38

-30

-22

-14

-6

2

10

18

26

34

M a r - 0 6

S e p - 0 6

M a r - 0 7

S e p - 0 7

M a r - 0 8

S e p - 0 8

M a r - 0 9

S e p - 0 9

M a r - 1 0

S e p - 1 0

M a r - 1 1

S e p - 1 1

M a r - 1 2

S e p - 1 2

M a r - 1 3

( U S $

, b n )

Current account balance Capital account balance

Source: RBI

27 June 2013

Balance of Payments

Short-lived happiness

Higher growth in exports and contraction in imports caused a sharpmoderation in the current account deficit (CAD) in 4QFY13. Steadyinflows under remittances and software exports also contributed innarrowing of CAD to 3.6% of GDP. However, capital account surplusnarrowed due to contraction in other banking capital. We expect therupee to remain under pressure in the next one year.

CAD at 3.6% of GDP. India’s CAD for 4QFY13 narrowed to US$18.2bnfrom US$31.8bn in 3QFY13. It stood at 3.6% of GDP, the lowest in pasttwo years. During FY13, CAD has widened to US$87.9bn or 4.8% of GDPcompared with US$78bn (4.2% of GDP) in FY12.

Trade deficit narrows. During the quarter, exports grew 5.9% yoy, whileimports declined 1%, leading to a sharp moderation in trade deficit toUS$45.6bn (US$58.4bn in 3QFY13). This was the single biggest contributorto the sharp moderation in CAD in 4QFY13.

Worker remittances, software exports firm. Workers’ remittances in thequarter, at US$15.8bn, remained steady versus US$15.7bn in 3QFY13. Thiscomponent has risen exponentially (~8x) in the past decade. Continuing its

momentum, software services exports in 4QFY13 increased to US$17.1bn,the highest ever in a single quarter.

Capital a/c surplus narrows on fall in banking capital.

On account ofcontraction in other banking capital (-US$6.4bn), the capital account surplusnarrowed to US$20.5bn versus US$31.5bn inflows in 3QFY13. It wouldhave declined further, had there not been strong portfolio inflow ofUS$11.3bn.

External borrowings pick up.

External commercial borrowings (ECBs) ina quarter rose to US$4.2bn versus US$2.8bn in 3QFY13. NRI deposits alsorose marginally to US$2.8bn in the quarter.

Outlook.

CAD is likely to pick up again in 1QFY14 due to high goldimports during Apr-May’13. Remittances and software exports could,however, counterbalance the high merchandise trade deficit. A sharpdepreciation of the rupee may increase competitiveness of Indian exports.

This could reduce India’s CAD, if global activities pick up in next one-twoyears. However, the capital account surplus may moderate in coming quarterdue to debt outflows; there could be some relief from gradual improvementin FDI inflows and commercial borrowings. Though the rupee mayappreciate in next two-three months on some positive policy measures, weexpect it to reach ~61-62 per US dollar by end of Jun’14 due to increasing

vulnerability on the capital account side.

Current A/c bal. 4QFY13): - US$18.2bn

Capital A/c bal. 4QFY13): US$20.5bn


2/5

27 June 2013 Balance of Payments – Short-lived happiness

Anand Rathi Research 2

Fig 3 – Decline in imports and pick up in exports lead to narrowing of CAD

US$ bn FY08 FY09 FY10 FY11 FY12 4QFY13 FY13

I Current account balance I.A+I.B -15.7 -27.9 -38.2 -45.9 -78.2 -18.2 -88.2

I.A Merchandise balance I.A.1+I.A.2 -91.5 -119.5 -118.2 -130.6 -189.8 -45.6 -195.7

I.A.1 Exports 166.2 189.0 182.4 250.5 309.8 71.8 288.8

I.A.2 Imports -257.6 -308.5 -300.6 -381.1 -499.5 -117.4 -484.4

I.B Invisible balance I.B.1+I.B.2+I.B.3 75.7 91.6 80.0 84.6 111.6 27.5 107.5I.B.1 Services balance I.B.1.a+I.B.1.b 38.9 53.9 35.8 48.8 64.1 17.0 64.9

I.B.1.a Software 36.9 43.7 48.2 53.3 61.0 17.1 63.5

I.B.1.b Other services 1.9 10.2 -12.5 -4.4 3.1 -0.1 1.4

I.B.2 Transfers I.B.2.a+I.B.2.b 41.9 44.8 52.3 53.1 63.5 15.7 64.0

I.B.2.a Private Transfers (Workers' remittance) 41.7 44.6 52.1 53.1 63.5 15.8 64.3

I.B.2.b Official Transfers 0.2 0.2 0.3 0.0 0.0 -0.1 -0.3

I .B.3 Income -5.1 -7.1 -8.0 -17.3 -16.0 -5.2 -21.5

II Capital account balance II.A+II.B+II.C+II.D+II.E 106.6 6.8 51.6 62.0 67.8 20.5 89.3

II.A Foreign investment II.A.1+II.A.2 43.3 5.8 50.4 39.7 39.2 17.0 46.7

II.A.1 FDI II.A.1.a+II.A.1.b 15.9 19.8 18.0 9.4 22.1 5.7 19.8

II.A.1.a FDI in India 34.7 37.7 33.1 25.9 33.0 7.2 27.0

II.A.1.b FDI abroad -18.8 -17.9 -15.1 -16.5 -10.9 -1.4 -7.1

II.A.2 Portfolio investment II.A.2.a+II.A.2.b 27.4 -14.0 32.4 30.3 17.2 11.3 26.9

II.A.2.a Portfolio investment in India 27.3 -13.9 32.4 31.5 17.4 11.5 27.8

II.A.2.b Portfolio investment abroad 0.2 -0.2 0.0 -1.2 -0.2 -0.2 -0.9

II.B Loans II.B.1+II.B.2+II.B.3 40.7 8.3 12.4 28.4 19.3 9.2 31.1

II.B.1 External assistance 2.1 2.4 2.9 4.9 2.3 0.5 1.0

II.B.2 External commercial borrowing 22.6 7.9 2.0 12.5 10.3 4.2 8.5

II.B.3 Short-term credit 15.9 -2.0 7.6 11.0 6.7 4.5 21.7

II.C Banking capital II.C.1+II.C.2 11.8 -3.2 2.1 5.0 16.2 -3.6 16.6

II.C.1 NRI deposits 0.2 4.3 2.9 3.2 11.9 2.8 14.8

II.C.2 Others 11.6 -7.5 -0.8 1.7 4.3 -6.4 1.7

I I.D Rupee debt -0.1 -0.1 -0.1 -0.1 -0.1 0.0 -0.1

II.E Other capital 11.0 -4.0 -13.2 -11.0 -6.9 -2.1 -5.0

III Errors and Omissions 1.3 1.1 0.0 -3.0 -2.4 0.3 2.7

IV Overall BoP balance I+II+III 92.2 -20.1 13.4 13.1 -12.8 2.7 3.8

V Monetary Movements -IV=V.A+V.B -92.2 20.1 -13.4 -13.1 12.8 -2.7 -3.8V.A I.M.F 0.0 0.0 0.0 0.0 0.0 0.0 0.0

V.B Foreign Exchange Reserves (Increase - / Decrease +) -92.2 20.1 -13.4 -13.1 12.8 -2.7 -3.8

Source: RBI

Fig 4 – Current account deficit narrows to 3.6% in 4QFY13, from 6.5% in 3QFY13

- 6 . 5

- 3 . 6

-9

-6

-3

0

3

6

9

12

M a r - 0 6

S e p - 0

6

M a r - 0 7

S e p - 0

7

M a r - 0 8

S e p - 0

8

M a r - 0 9

S e p - 0

9

M a r - 1 0

S e p - 1

0

M a r - 1 1

S e p - 1

1

M a r - 1 2

S e p - 1

2

M a r - 1 3

( % o

f G D P )

Current account balance Capital account balance

Source: RBI


3/5



Fig 5 – Merchandise deficit narrows to 9% of GDP in 4QFY13 vs. 12% in 3QFY13

-15

-12

-9

-6

-3

0

3

6

9

M a r -

0 6

S e p - 0

6

M a r -

0 7

S e p - 0

7

M a r -

0 8

S e p - 0

8

M a r -

0 9

S e p - 0

9

M a r -

1 0

S e p - 1

0

M a r -

1 1

S e p - 1

1

M a r -

1 2

S e p - 1

2

M a r -

1 3

( % o

f G D P )

Merchandise balance Invisible balance

Source: RBI

Fig 6 – Workers’ remittances and software exports continue to rise

3

6

9

12

15

18

M a r - 0 6

S e p - 0

6

M a r - 0 7

S e p - 0

7

M a r - 0 8

S e p - 0

8

M a r - 0 9

S e p - 0

9

M a r - 1 0

S e p - 1

0

M a r - 1 1

S e p - 1

1

M a r - 1 2

S e p - 1

2

M a r - 1 3

( U S $ b n )

Software Private Transfers (Workers' remittance)

Source: RBI

Fig 7 – Gap between RBI and GoI trade data

-60

-50

-40

-30

-20

-10

0

10

M a r -

0 6

S e p - 0

6

M a r -

0 7

S e p - 0

7

M a r -

0 8

S e p - 0

8

M a r -

0 9

S e p - 0

9

M a r -

1 0

S e p - 1

0

M a r -

1 1

S e p - 1

1

M a r -

1 2

S e p - 1

2

M a r -

1 3

( U S $ b n

)

Trade balance -RBI Trade balance -GoI Di fference

Source: Government of India, RBI


4/5



Fig 8 – Improvement in FDI and portfolio inflows

-6

-3

0

3

6

9

12

15

18

21

M a r - 0 6

S e p - 0

6

M a r - 0 7

S e p - 0

7

M a r - 0 8

S e p - 0

8

M a r - 0 9

S e p - 0

9

M a r - 1 0

S e p - 1

0

M a r - 1 1

S e p - 1

1

M a r - 1 2

S e p - 1

2

M a r - 1 3

( U S $ b n

)

FDI Portfolio investment

Source: RBI

Fig 9 – Short-term credit softens in 4QFY13 from near all-time high

-6

-4

-2

0

2

4

6

8

M a r - 0 6

S e p - 0

6

M a r - 0 7

S e p - 0

7

M a r - 0 8

S e p - 0

8

M a r - 0 9

S e p - 0

9

M a r - 1 0

S e p - 1

0

M a r - 1 1

S e p - 1

1

M a r - 1 2

S e p - 1

2

M a r - 1 3

( U S $ b n )

External commercial borrowing Short-term credit

Source: RBI

Fig 10 – Banking capital contracts in 4QFY13

-9

-7

-5

-3

-1

1

3

5

79

11

13

M a r - 0 6

S e p - 0

6

M a r - 0 7

S e p - 0

7

M a r - 0 8

S e p - 0

8

M a r - 0 9

S e p - 0

9

M a r - 1 0

S e p - 1

0

M a r - 1 1

S e p - 1

1

M a r - 1 2

S e p - 1

2

M a r - 1 3

( U S $ b n )

Banking capital Other capital

Source: RBI


5/5

Appendix

Analyst CertificationThe views expressed in this Research Report accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the researchanalyst(s) was, is, or will be directly or indirectly related to the specific recommendations or views expressed by the research analyst(s) in this report. The research analysts are bound bystringent internal regulations and also legal and statutory requirements of the Securities and Exchange Board of India (hereinafter “SEBI”) and the analysts’ compensation are completelydelinked from all the other companies and/or entities of Anand Rathi, and have no bearing whatsoever on any recommendation that they have given in the Research Report.

The research analysts, strategists, or research associates principally responsible for the preparation of Anand Rathi Research have received compensation based upon various factors,

including quality of research, investor client feedback, stock picking, competitive factors, firm revenues and overall investment banking revenues.Anand Rathi Ratings Definitions

Analysts’ ratings and the corresponding expected returns take into account our definitions of Large Caps (>US$1bn) and Mid/Small Caps (US$1bn) >15% 5-15%

28061337530502balance of payments - 280613

Documents