Debt cap­i­tal help fi­nance CAD

Project Monitor - - FRONT PAGE - FDI in­flow was $6.6 bil­lion. This was the se­cond quar­ter of a drain in Port­fo­lio in­vest­ment CAD nar­rowed to 1.4 per cent of GDP in H1 of 2015-16 from 1.8 per cent in H1 of 2014-15 on the back of con­trac­tion in the trade deficit and a marginal im­prove­ment

EDon’t limit a child to your own learn­ing, for he was born in an­other time. — Rabindranath Tagore ven as In­dia’s cur­rent ac­count deficit (CAD) at $8.2 bil­lion (1.6 per cent of GDP) in Q2 of 2015-16 was lower than $10.9 bil­lion (2.2 per cent of GDP) in this quar­ter a year ago, it was higher than $6.1 bil­lion (1.2 per cent of GDP) in the pre­ced­ing quar­ter, and a re­cent low of $0.6 bil­lion two quar­ters back.CAD re­flects an equiv­a­lent amount of for­eign cap­i­tal to sup­ple­ment do­mes­tic sav­ings to fi­nance do­mes­tic cap­i­tal for­ma­tion, i.e.projects in­vest­ment. The con­trac­tion in CAD on a y-o-y ba­sis was pri­mar­ily on ac­count of lower trade deficit of $37.4 bil­lion as com­pared with $39.7 bil­lion in Q2 of last year though it was higher than the level in the pre­ced­ing quar­ter ($34.2 bil­lion). Half of mer­chan­dise trade deficit for Q2 was made good by sur­plus of $18 bil­lion in trade in ser­vices. Whereas pri­mary in­come, mainly div­i­dend & profit repa­tri­a­tion by for­eign com­pa­nies in In­dia re­sulted in a drain of $5 bil­lion, the sta­ble and strong in­ward re­mit­tances by In­dian work­ers work­ing abroad brought in $16 bil­lion. By the way, to­tal ex­port of goods and ser­vices was around $106 bil­lion and to­tal im­port cost the coun­try $125 bil­lion. In Mer­chan­dise im­port of $105 bil­lion (-14 per cent) over the quar­ter, POL im­port was $23.5 bil­lion (-44 per cent) and non­mon­e­tary gold $10 bil­lion (+30 per cent).

Cap­i­tal flows brought in a net $9.1 bil­lion, re­sult­ing in a net ad­di­tion of $0.9 bil­lion to forex re­serves on BoP ac­count. Bank­ing cap­i­tal brought in $7.3 bil­lion, in­clud­ing $4.2 bil­lion in NRI de­posits. Port­fo­lio in­vest­ment re­sulted in a drain of $6.4 bil­lion and

Trends in H1 the to­tal for the XII Plan pe­riod to around ` 1.10 lakh crore (see ta­ble). Apart from cap­i­tal work in progress of around ` 40,000 crore, projects worth ` 13,465 crore have been awarded, in projects ag­gre­gat­ing ` 23,301 crore, bids have been opened while in projects worth ` 9,034 crore, ten­ders have been in­vited.

The high­light of Q3 of FY16 was the rate of cap­i­tal­iza­tion of capex, which means the con­ver­sion of work in progress into op­er­a­tional as­sets. In the said pe­riod, ` 17,207 crore of capex was cap­i­tal­ized. This has been the high­est in any quar­ter so far, noted Jha. In the first nine months of FY16, a to­tal of ` 26,802 crore worth of projects were cap­i­tal­ized. The high­est-ever level of projects cap­i­tal­ized in any year so far has not ex­ceeded ` 22,000 crore. The cur­rent fis­cal year, there­fore, has been un­prece­dented on this count.

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