Trade deficit widens to $15.8 bn in Q1

India's balance of payments for the first quarter of this fiscal showed a three-fold increase in deficit in trade balance at $15.8 billion against $5.1 billion in the same period last fiscal.

Notwithstanding a marginal increase in invisible surplus, the sharp expansion in trade deficit turned the current account into a deficit of $6.2 billion in April-June 2005 against a surplus of $3.4 billion in Q1 of last fiscal, according to figures released by the Reserve Bank of India in Mumbai.

"With the growth in imports outstripping the pace of export growth, the merchandise trade deficit, on payments basis, expanded to $15.8 billion," RBI said.

It said import payments, reflecting the buoyant economic activity, increased sharply by 63.2 per cent -- oil imports going up by 31 per cent and non-oil import payments higher by 77.9 per cent.

Exports growth was relatively moderate. "Merchandise export growth at around 22 per cent remained strong in Q1 of 2005-06, although the rate of export growth moderated reflecting the high base in the previous year (34 per cent)," it said.

Overall import bills surged to $37.5 billion from $23 billion in the first quarter of last fiscal, primarily on account of higher crude oil prices.

"With crude oil price (Indian basket) averaging $49.2 per barrel in April-June 2005 ($34.1 per barrel in Q1 FY04), oil imports grew sharply in Q1 of 2005-06. The rise in POL imports also reflected an increase in volume terms (up 13.4 per cent in April-June 2005)," RBI said.

The current account deficit was more than offset by surplus in the capital account, resulting in an accretion to the foreign exchange reserves to the order of $1.2 billion on a balance of payments (excluding valuation effects) basis in Q1 of this fiscal, RBI said.

It said that taking into account the valuation changes, foreign exchange reserves recorded a decline of $3.1 billion to $138.4 billion at the end of June 2005.