123ArticleOnline Logo
Welcome to 123ArticleOnline.com!

ALL >> Investing---Finance >> View Article

The Coppers Are Thinning

By Author: thefinapolis magzine
Total Articles: 3

Forex Reserves depleted by $10.4bn in Q2FY14, sharpest decline in last seven quarters, mainly due to decline in capital account balance. Capital account balance declined by $5.4 bn primarily driven by sharp FII outflow, outflows in foreign loans by commercial banks and decline of $6.9 bn in other capital. FII outflows increased sharply from Jun’13 onwards, after Fed indicated high possibility of tapering of quantitative easing. FII outflows augmented further in Q2FY14 which amounted to $6.6 bn within which significant proportion of it was debt investment.


Outflow in other capital is indicating that exports receipts are received with significant lag. Strong FDI investment and increase in net overseas borrowing by banks aided in stalling the further decline in Capital Account Balance. Net trade credit outflow increased to $1.9 bn in Q2FY14 from inflow of $2.5 bn in Q2FY14 and $4.1 bn inflow in Q2FY13; with drop in imports in ensuing months, analysts expect trade credit to further shrink in subsequent quarters.


On the other hand, merchandise deficit narrowed down to 10 quarter low of $33.3 bn to 7.9% of GDP. Sharp growth in exports of 11.6% Y/Y in Q2FY14 as against 1.2% de-growth in previous quarter aided in driving the moderation of deficit. Export growth augmented on back of favorable currency and signs of improvement in global economy contributed largely by textiles and agricultural product exports.
On the other hand, imports declined sharply on account of fall in gold imports and machinery imports. Strong action taken by government and RBI to curb gold imports has led to such a sharp correction in imports. Sharp depreciation in the currency, improvement in global conditions and actions taken by government is likely to maintain favorable merchandise deficit for rest of the year.

Import as a ratio to foreign exchange reserves has further fallen to 6.6 months from a peak of 17 months in Jun’04; this is mainly driven by sharper depletion in foreign exchange reserves despite substantial slowing down of imports. Increasing external vulnerability is indicated by falling import cover ratio. Software services exports increased to $16.3 bn due to favorable currency which pushed the overall services net exports to 4.3% of GDP. Net investment income declined by $6.4 bn in Q2FY14 on increasing servicing of rising external liabilities.

Higher reliance on short term inflows to finance CAD is likely to adversely affect net investment income and continue to pressurize CAD. While depreciating currency not only aided in increasing the inflow in private transfers but also augmented the growth in NRI deposits. To know more visit theFinapolis.com

Total Views: 42Word Count: 421See All articles From Author

Investing / Finance Articles

1. How Bad Credit Loans Work For Better Financial Solutions In The Uk?
Author: Sara James

2. The Free Forex Robot Minimize Risk And Maximize Profits In The Forex Market
Author: johnsyanol

3. How The Internet Has Made Money Transfer To India Simple?
Author: jack

4. What Are The Major Advantages Of Bill Discounting India?
Author: Marketfinanc

5. Best Home Loan Scheme 04433044488 Documents Required For Home Loan
Author: Loansa Assit

6. Algotrade Can Help You Gain Consistent Returns On Forex Trading
Author: johnsyanol

7. Did You File Itr For Financial Year 2016-17?
Author: Did You File ITR For Financial Year 2016-17? India

8. The Advantages And Disadvantages Of Life Insurance
Author: Sushant ingh

9. Important Aspects Of Banking
Author: Sushant Singh

10. Are You In Need Of Monetary Help For Business Establishment?
Author: John Bairstow

11. Borrowing Commercial Loan Is A Secure Way For Business Owners
Author: John Bairstow

12. The Race To Transform Yourself Into A Profitable Forex Trader
Author: John Arnold

13. House Construction Loan For Bkhata Property Apply 9964563600
Author: House Construction Loan for Bkhata

14. Gst Impact On Mutual Fund Market
Author: Investment

15. Klse Market Understanding Before Investing
Author: Multi management and future solutions

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: