CHAPTER IV

BALANCE OF PAYMENTS IN INDIA:

A TREND ANALYSIS
Balance of payments position clearly reveals the external monetary position of
an economy. Balance of payments is an economic barometer which shows the
international financial position of a country. Considering this, in this chapter, an
attempt has been made to examine the performance of Indias balance of payments
since the planning period. For this, the chapter has been divided into two sections.
Section I studies the balance of payments performance since the planning period and
section II studies the balance of payments position since 1980-81 to 2005-06 by
making a comparison of pre-liberalization period to the post-liberalization period.
For dividing the whole planning period, Bimal Jalans criteria has been
followed. Bimal Jalan has divided the period after 1956-57 into three sub-periods
depending upon the nature of balance of payments problem and external aid situation.
The three sub-periods are : 1956-57to 1975-76 (Period I comprising second,
third and fourth plans and first two years of fifth plan); 1976-77 to 1979-80 (Period II
comprising last three years of fifth plan and rolling plan) ;1980-81 to 1990-91(Period
III comprising sixth and seventh plan period), while IV sub-period covers period after
1990-91.

I
Balance of Payments Position before 1956-57
First Plan Period (i.e.1951-52 to 1955-56):- The balance of payments position
was quite comfortable during this period as country experienced a small deficit in
BOP account only to the extent of $117 million. Balance of payments as a percent of
GDP has shown a deficit of just 0.17 percent over this period. Table 4.1 reveals that
the BOP account has turned from a deficit of $347 million in 1951-52 to a good
surplus in subsequent years. This period was basically affected by the Korean war
boom, American recession and favorable monsoon at home which helped to boost
agricultural and industrial production. These years were unusual in as much as India
56

did not experience any serious payments difficulties. Foreign exchange reserves were
sufficient to cover almost 15 months imports.
If we look at the components of balance of payments, Table 4.2 reveals that on
an average, current account has shown a deficit of $17.8 million. Current account
balance as a percent of GDP showed a deficit of 0.06 percent during this period. This
account showed a huge deficit of $342 million in 1951-52 which then turned into
surplus during all the subsequent years. However, current account surplus decreased
from $126 million in 1952-53 to $15 million in 1955-56. The balance on capital
account too was in deficit, the annual average figure being $27million during this
period and as a percent of GDP showed a deficit of 0.086 percent. Deficit on capital
account increased from $5 million in 1951-52 to $90 million which turned into a
surplus of $23 million in 1955-56. Overall, the balance of payments position was
quite satisfactory during this period.

Balance of Payments Position after 1956-57

Period I (1956-57 to 1975-76)
This period saw heavy deficits in balance of payments and extremely tight
payments position. This period witnessed three wars (1962 war with China; 1965 and
1971 war with Pakistan), several droughts (the most severe being the droughts of
1965-66 and 1966-67), and the first oil shock in 1973. The position of balance of
payments during the plan period has been discussed below:
Second Plan:- The overall balance of payments account, on an average, faced a huge
deficit of $1373 million during this period. Balance of payments deficit as percent of
GDP has also increased from a deficit of 0.17 percent during the first plan period to
1.038 percent during second plan. BOP account turned from a surplus of $38 million
in 1955-56 to a huge deficit of $620 million in 1957-58 which decreased to $10.1
million in 1960-61. Foreign exchange reserves were sufficient to cover 4.91 months
of imports. The highly unfavorable BOP during this period was the result of (a) heavy
imports of capital goods to develop heavy and basic industries (b) the failure of
agricultural production to rise to meet the growing demand for food and raw materials
from rapidly growing population and expanding industry.

57

Regarding the structure of balance of payments, balance of trade showed a

huge deficit out of which only 20 percent of this deficit was financed by invisible
earnings and private transfer payments. The deficit on current account (Table 4.1) was
$693 million which was quite high. Current account as percent of GDP showed a
deficit of 2.26 percent. Deficit on current account increased from $657 million in
1956-57 to $906 million in 1957-58 but then reduced to $ 824 million in 1960-61. If
we look at capital account figures, it reveals that capital account has shown a surplus
in all the years of this planning period. Capital account surplus averaged at $418.4
million during this period. Surplus increased from $77 million in 1956-57 to $599
million in 1958-59 and further to $723 million in 1960-61. Capital account as a
percent of GDP has also shown a surplus of 1.368 percent during this period. But still
this surplus was insufficient to finance the deficit given by current account during this
period which led to substantial and mounting deficit in balance of payments.
Third Plan:- The structure of balance of payments during the third plan was not very
much different from the structure obtained in the second plan. The average deficit of
balance of payments account was $171 million in the third plan. Average balance of
payments deficit as a percent of GDP was 0.09 percent during this period. Foreign
exchange reserves, on an average, were sufficient to cover 2.89 months imports
which was quite less. During this plan, balance of payments account has turned from a
deficit of $135 million in 1961-62 to a surplus of $38 million in 1965-66.
Component-wise analysis shows that the last three years of the plan did
witness an increase in money value of exports but this was too insufficient to fill up
the gap in balance of payments because of fast expanding imports under the impact of
defence and development which has stagnated the balance of trade deficit. There was
almost no surplus on account of invisibles and private transfers which stagnated and
led to deterioration in the balance of current account which stood at a deficit of $835.6
million during this plan period and as a result, current account as a percent of GDP
showed a deficit of 1.74 percent. The entire deficit in balance of current account was
met largely by foreign aid inflows, mostly in the form of loans and external
assistance. Thus, balance on capital account showed a good surplus of $801.4 million
during this period. Capital account surplus as a percent of GDP was 1.77 percent.
Capital account balance increased from $510 million in 1961-62 to $865million in

58

1964-65 and further to $1100 million in 1965-66, thus neutralizing a bit the bad
impact of current account deficit on balance of payments position.
Annual Plans (1966-67 to 1968-69):- Notwithstanding the successive droughts and
consequent food imports, balance of payments difficulties were less acute during this
period as compared to second and third plan periods. The period of three annual plans
witnessed a good surplus of $58 million in the balance of payments account (Table
4.1). BOP as a percent of GDP showed a surplus of 0.04 percent while foreign
exchange reserves financed 2.72 percent of imports during these annual plan periods.
Various measures taken by the government to smoothen the situation led to a surplus
in BOP account during these years.
Regarding the components of BOP, average current account deficit was $999
million during these years. Current account deficit as percent of GDP was 2 percent.
Current account deficit was quite large, particularly in the first two annual plans (i.e.
deficit of $1375 million in first annual plan). This is mainly because of the fact that
invisibles which used to be positive and which used to reduce the trade deficit either
dwindled or even became negative (for the first time) during these years. During this
period, heavy amount had to be paid by India in the form of interest payments on
loans contracted earlier. This wiped out the surplus on invisibles account. But the
deficit in current account reduced to $546 million in 1968-69. While the other
component i.e. capital account showed a surplus of $1018.3 million during these
annual plans. Capital account as a percent of GDP showed a surplus of 2.17 percent.
Fourth Plan period (i.e. 1969-70 to 1973-74):- During this period, BOP account
showed a substantial surplus of $356 million (Table 4.2). BOP account witnessed a
surplus of $357 million in year 1969-70 which decreased to $28 million in 1971-72
and further remained at the same level in year 1973-74, while foreign exchange
reserves also increased and were able to cover 4.76 percent of imports. Balance of
payments as percent of GDP showed a surplus of 0.134 percent (Table 4.4). The
favorable balance of payments situation during this period was due to adoption of
objective of self-reliance by the government during this plan. Accordingly,
government managed to restrict imports and succeeded in expanding exports. On the
imports side, restriction of imports was made possible through good crops in 1968-69
and 1970-71 and consequent significant

reduction of imports of foodgrains. On the

exports side, vigorous export promotion measures succeeded in boosting exports of

59

traditional as well as non-traditional items. But balance of payments account

witnessed a huge deficit of $599 million in year 1974-75 due to substantial increase
in price of crude oil in early 1974 (by about four times) which had an adverse effect
on the oil importing developing countries as their import bill has soared to new high
levels. However, this deficit again turned into a surplus of $707 million in year 197576.
As far as components of BOP account are concerned, this period showed a
much better position in current account. Current account showed a remarkable surplus
of $684.4 million during this period. Current account as percent of GDP showed a
small deficit of 0.28 percent during this period. Deficit on current account increased
from $312 million in 1969-70 to $ 403 million in 1972-73 which then turned into a
huge surplus of $1444 million in 1973-74. This remarkable improvement in current
account balance in 1973-74 was due to favorable invisibles account due to receipt
from U.S.A. on the disposition of PL 480 and other rupee funds (Neog, 1994). This
surplus turned into a deficit of $1198 million in 1974-75 which further reduced to
$206 million in 1975-76. While balance on capital account showed an average surplus
of $178 million during fourth plan period but this was less than the surplus during
earlier periods. Trend analysis reveals that both the components i.e. current account
and capital account increased at non-significant rate during this period. While the
indicators of BOP i.e. BOP/GDP increased at significant rate. However, import cover
of foreign exchange reserves decreased at a significant rate during this period thus
indicating that foreign exchange reserves were not capable of financing the imports of
that period.

Period II (1976-77 to 1979-80)

This relatively short period was a golden period as far as balance of payments
is concerned. The average surplus in balance of payments account amounted to $5462
million during fifth plan period (Table 4.2). Surplus in balance of payments increased
from $1905 million in 1976-77 to $ 2141 million in 1977-78 which decreased to
$1308 million in 1978-79 and further to $405 million in 1979-80. Balance of
payments as a percent of GDP showed a good surplus of 1.056 percent during this
golden period. Import cover of foreign exchange reserves has increased to 6.72
60

percent (Table 4.4). This was due to good surplus of $620 million in current account
during this period. The two factors which were responsible for this surplus were :- (i)
rapid increase in private remittances from oil exporting countries (ii) and the value of
exports was also rising under the impact of promotional measures. There was a strong
growth in exports of nearly 31 percent in 1975-76 over 1974-75 and of 23 percent in
1976-77 over 1975-76. The international environment was also conducive as world
trade rose by over 8 percent a year in value terms during this period. As a result of
this, Indian economy adjusted to first oil shock rather quickly (Debroy, 1998).
Another important point of this period was that during 1977-78 and in the next
two years, the Janata Government followed a policy of haphazard import
liberalization at a time when export boom had almost petered out. The result was reemergence of trade deficit from 1977-78 onwards which led to a deficit in current
account to $290 million in 1978-79 and further to $685 million in 1979-80. Current
account as a percent of GDP showed a surplus of 0.1 percent during this period.
However, capital account showed improvement during this very short period.
Capital account witnessed a surplus of $968.6 million during fifth plan period.
Surplus on capital account increased from $905 million in 1976-77 to $1090 million
in 1979-80. Thus, on the whole, for the first time since planning era started, India was
in a comfortable position in its external account as balance of payments decreased at
non-significant rate during this period.

Period III (1980-81 to 1990-91)

This period comprised of sixth and seventh plan period. This decade was also
known as decade of difficulties in balance of payments. There was a sea change in
balance of payments position since 1980-81.
Sixth Plan:- The average deficit in balance of payments account was $4813 million
during the sixth plan. Balance of payments as a percent of GDP showed a deficit of
0.56 percent. Deficit increased from $1140 million in 1980-81 to $2523 million in
1981-82 which decreased to $561 million in 1983-84.This deteriorating position of
BOP was due to huge deficit faced by current account. Average deficit in current
account touched the astronomical figure of $2658.2 million during this period. The
61

reason behind the increase in deficit was tendency of flattening out of private
remittances from middle-east countries. India had to meet its balance of payments
deficit during this period with the withdrawals of SDRs and borrowings from IMF.
However, capital account has shown a surplus of $968.6 million during this period.
Capital account surplus increased from $1665 million in 1980-81 to $ 2087 million in
1982-83 and further to $3147 million in 1984-85. Capital account as a percent of GDP
was 1.14 percent. Foreign exchange reserves were sufficient to cover 4.12 percent of
imports during this period.
Seventh Plan:- The average deficit in balance of payments decreased tremendously
to $9 million in seventh plan from $4813 million in sixth plan. Balance of payments
deficit as percent of GDP also declined to 0.008 percent. This was due to substantial
increase in capital account receipts to $2042.2million. While the deficit in current
account has increased to $5823.4 million due to highest ever current account deficit of
$7997 million in 1988-89 which showed a quite disturbing situation of Indian
economy during this period .Capital account as a percent of GDP was 2.41 percent
and current account deficit as a percent of GDP was 2.16 percent while foreign
exchange reserves were now sufficient to cover 3.4 months imports. Though capital
account has shown a surplus but that was not able to completely offset the adverse
impact of deficit of current account on Indian economy. Further, the gulf crisis in
1990-91 aggravated the situation whose immediate impact was rise in balance of
payments to an astronomical figure of$2492 million. Balance of payments deficit as
percent of GDP was 0.88 percent in 1990-91. Current account deficit averaged to
$9680 million in 1990-91. Current account as a percent of GDP has shown a deficit of
3.4 percent during this year. Thus, this period ended up with a deteriorated and quite
uncertain situation. Trend analysis reveals that though capital account increased at
significant rate but current account balance decreased at significant rate.
Thus, above discussion brings out that before liberalization policy was launched,
Indias balance of payments account showed a mixed trend of improvement and
deterioration. This account almost remained in deficit during first, second and third
plans mainly because of heavy imports of capital goods to develop heavy and basic
industries and failure of agricultural production to rise to meet the growing demand of
food and raw material. However, the period comprising fourth and fifth plans was the
golden period as far as balance of payments position is concerned as this period faced
62

huge surpluses in balance of payments account. This period witnessed new confidence
in the external sector. But the second oil shock was the precursor of another phase of
strain on Indias balance of payments. Balance of payments situation started
deteriorating during early 1990s with underlying expansion in economic activities,
exports and imports grew in tandem, keeping the trade deficit at a high level. The
invisible remittances also deteriorated sharply due to stagnation in workers
remittances and rising interest burden due to building up of external debt. The severity
of balance of payments crisis in early 1990s can be gauged from the fact that Indias
foreign currency assets depleted rapidly from US $ 3.7 billion in August 1990 to US $
975 million on July 12,1991.
On the whole, the balance of payments situation during pre-liberalization
period deteriorated to such an extent that there was an immense need of powerful
actions by the government to reduce the deficit and to enhance the international
competitiveness of the economy(Reddy, 2006).

Balance of Payments after 1991

Eighth Plan:- The balance of payments situation in eighth plan period has been
distinctly different from the situation that prevailed in the earlier period as balance of
payments situation improved considerably during this plan period. New economic
reforms were initiated in 1991 to deal with the adverse current account position of
India. The efforts were made to step up the exports and the efforts have become
successful as balance of payments account showed a tremendous surplus of $3861.2
million during this period. Balance of payments as a percent of GDP showed a surplus
of 1.37 percent during eighth plan and foreign exchange reserves were able to finance
around 7 months imports which were mostly originated from excessive borrowings
and large inflows of external assistance. However, Economic Survey (1995-96)
observed, The development in Indias trade and payments over the past 5 years mark
a noticeable structural change towards a more stable and sustainable balance of
payments. Regarding the position of current account, it shows that current account
deficit declined to $3716.4 million in eighth plan period from $ 5823.4 million in
seventh plan. Current account deficit as a percent of GDP was 1.12 percent. Current
account deficit declined from $3526 million in 1992-93 to $3369 million in 1994-95
but further increased to $4619 million in 1996-97, while capital account surplus
averaged at $7577.6 million. Capital account as a percent of GDP showed a surplus of
63

2.69 percent. Surplus on capital account increased tremendously from $2936 million
in 1992-93 to $9695 million in 1993-94 and further to $11412 million in 1996-97 due
to liberalization measures taken by the government on capital account.
Ninth plan:- During this period, Indias balance of payments remained fairly well
while facing turbulence in the international economic and financial markets. Infact,
balance of payments in the ninth plan remained comfortable with substantial reserve
accumulation supported by strong capital flows. Balance of payments account
witnessed a handsome surplus of $6552 million during this plan period. BOP/GDP
showed a surplus of 1.68 percent during this period. The surplus of balance of
payments account increased from $4511 million in 1997-98 to $6402 million in 199900. The improvement in balance of payments account was made possible largely
because of dynamism in export performance and sustained buoyancy in invisible
receipts. However, this surplus declined to $5868 million in year 2000-01 as there
were pressures on balance of payments due to sharp downturn in the international
equity prices and successive increases in interest rates in U.S. and Europe; but the
situation eased with the mobilization of funds under the India Millennium Deposits,
which helped to revert the declining trend in reserves and enhanced confidence in the
strength of Indias external sector. As a result, balance of payments situation
experienced a huge surplus of $11757 million in the last year 2001-02. Average
current account deficit was $2700.4 million. Current account deficit decreased from
$5500 million in 1997-98 to $2666 million in 2000-01 but showed a surplus of $3400
million in year 2001-02 after a gap of 24 years (current account surplus was earlier
recorded in 1977-78), which is a remarkable improvement in balance of payments
position of India. Current account deficit as a percent of GDP also averaged at 0.66
percent. The net capital inflows also improved during this period, thus resulting in
large build-up of reserves. Average surplus on capital account was $9252.6 million
during ninth plan period and capital account as percent of GDP increased to 2.32
percent during this period.
The Tenth Plan period was also quite comfortable as far as balance of payments is
concerned. The growing strength of Indias balance of payments observed in the postreform period since the crisis of 1991 continued in 2005-06. Balance of payments as a
percent to GDP has shown a surplus of 3.87 percent. The surplus of balance of
payments account increased from $16985 million in 2002-03 to $31421 million in
64

2003-04 due to a surplus in current account to the extent of $1104 million but then
declined to $ 15052 million in 2005-06 due to burgeoning trade deficit on account of
rising oil prices in 2003-04 and 2004-05.Current account surplus as a percent of GDP
was 0.5 percent. The current account, after being in surplus during 2001-02 to 200304, reverted to a deficit in 2004-05. This was despite a robust growth in net invisibles
account fuelled by software exports in private transfers. The current account deficit is
attributable to the widening trade deficit, driven primarily by the rise in international
prices of petroleum products & gold. Even in the years when there were some
surpluses on the current account, India had deficit on goods and services account and
a relatively larger trade deficit (Economic Survey, 2007-08). While the capital
account surplus showed a huge improvement as average capital account surplus
amounted to $21300.3 million in tenth plan period. Capital account surplus as a
percent of GDP increased to 3.48 percent during this period. On the whole, tenth plan
period was quite comfortable as far as balance of payments is concerned as capital
account increased at significant rate leading to significant increase in balance of
payments.

II
The analysis of balance of payments position of India given in Table 4.5 shows
that during pre-liberalization period (i.e.1980-81 to 1989-90), balance of payments deficit
was maximum in year 1981-82 had a tendency to decrease for next two years and then
showed a surplus of Rs.2602.79 crore in 1984-85. This decrease in deficit in balance of
payments was mainly because of decrease in current account deficit and increase in
capital account surplus. But in 1985-86, this account again showed deficit of Rs.2173.76
crore due to increase in deficit in current account by 98.29 percent. This deficit showed a
declining trend and witnessed a surplus during later years of this period leading to a
surplus of Rs.493.76 crore in 1989-90 due to increase in capital account surplus. Thus,
balance of payments account turned from a deficit of Rs.3553.53 crore in 1980-81 to a
surplus of Rs.493.76 crore in 1989-90. The balance of payments as a percent of GDP also
improved from -0.63 percent in 1980-81 to 0.05 percent in 1989-90.
The years 1990-91 and 1991-92 were the abnormal years of post-liberalization
period (i.e. 1992-93 to 2005-06), as the year 1990-91 experienced huge deficit of balance
65

of payments worth Rs.8812.63 crore due to maximum deficit on current account (of Rs.
34237.2 crore) and in 1991-92, deficit turned into a huge surplus of Rs.12614.05 crore as
deficit of current account decreased drastically, due to measures taken by the
Government.
During post-liberalization period, balance of payments of the country remained in surplus for
almost all the years (except for two years i.e. 1992-93 and 1995-96). Surplus on balance of
payments account increased from Rs.38912.79 crore in 1993-94 to Rs.48975.39 crore in
2005-06. This increase in surplus of balance of payments account was due to increase in
surplus on capital account. Capital account surplus increased from Rs.18584.01 crore in
1992-93 to Rs.81481.71 crore in 2005-06.
If we look at the overall scenario, balance of payments deficit was Rs.1920.50
crore during pre-liberalization period which turned into a good surplus of Rs.40190.4
crore during post-liberalization period. This surplus in balance of payments was
mainly because of decrease in average deficit of current account (to Rs.7136.02 crore
in post-liberalization period as compared to Rs.14406.4 crore during pre-liberalization
period) and increase in surplus of capital account(i.e. from Rs.12485.8 crore during
pre-liberalization period to Rs.46879.4 crore during post-liberalization period).On an
average, ratio of balance of payments to GDP improved from -0.32 percent during
pre-liberalization period to 1.54 percent during post-liberalization period indicating
sizeable improvement in balance of payments position during post-liberalization
period.
Regarding the components of balance of payments, Table 4.5 shows that on an
average, 82.14 percent of deficit in current account (CAD) was made up by capital
account during pre-liberalization period and the CAD deficit made up by capital
account improved to 233.47 percent during post-liberalization period thereby
indicating large improvement in making up of CAD by capital account in the later
period.
Trend Analysis:

Trend analysis given in Table 4.5(a) shows that balance of

payments as well as percentage of

balance of payments to GDP increased at a

significant rate during both the sub-periods as well as the whole period. Regarding the
trends in financing ratios, capital account
66

financed the current account deficit

negatively and at a significant rate in pre-liberalization period while positively at

non-significant rate financed the current account deficit during post-liberalization
period.
It is evident that after the launch of new economic policy, Indias progress in
terms of balance of payments position has been remarkable especially since mid 90s.
As a result of various measures taken during economic reforms, the performance of
external sector has become gradually strong. The stabilization measures of 1991-92
sharply reduced the imports, trade deficit and consequently current account deficit in
that year. Though import growth recovered and surged in mid-nineties, but current
account deficit remained well below 2 percent of GDP because of concomitant
buoyancy of exports and strong recovery of invisible earnings. On the other side,
portfolio earnings also responded smartly to new initiatives and climbed quickly to
peak levels. Balance of payments position shows a quite comfortable picture during
post-liberalization period.

67

Table 4.1
Indias Balance of Payments and its Components
Current Account
Capital Account
BOP Account
Year
(US $ million)
(US$ million)
(US $ million)
s81
-20
61
1950-51
1978-79
-342
-5
-347
1951-52
1979-80
126
-90
36
1952-53
1980-81
100
-5
97
1953-54
1981-82
12
-14
-2
1954-55
1982-83
15
23
38
1955-56
1983-84
-657
77
-580
1956-57
1984-85
-906
286
-620
1957-58
1985-86
-687
599
-88
1958-59
1986-87
-391
407
16
1959-60
1987-88
-824
72
-101
1960-61
1988-89
-645
510
-135
1961-62
1989-90
-744
715
-29
1962-63
1990-91
-734
807
73
1963-64
1991-92
-983
865
-118
1964-65
1992-93
-1072
1110
38
1965-66
1993-94
-1375
1210
-135
1966-67
1994-95
-1076
1139
63
1967-68
1995-96
-546
676
130
1968-69
1996-97
-312
669
357
1969-70
1997-98
-594
580
-14
1970-71
1998-99
-669
697
28
1971-72
1999-00
-403
360
-43
1972-73
2000-01
1444
-1410
28
1973-74
2001-02
-1198
600
-43
1974-75
2002-03
-206
913
28
1975-76
2003-04
1001
905
-599
1976-77
2004-05
1313
828
707
1977-78
2005-06
Source: Handbook of Statistics on Indian Economy, Reserve Bank of India (Various Issues).
Year

68

Current Account
(US$million)
-290
-685
-2804
-3179
-3407
-3216
-2417
-4867
-4560
-4852
-7997
-6841
-9680
-1178
-3526
-1158
-3369
-5910
-4619
-5500
-4038
-4698
-2666
3400
6345
14083
-5400
-10612

Capital Account
(US $ million)
1597
1090
1665
657
2087
2655
3147
4506
4512
5047
8064
6977
7188
3777
2936
9695
9156
4689
11412
10011
8260
11100
8535
8357
10640
17338
31559
25664

BOP Account
(US $ million)
1308
405
-1140
-2523
-1319
-561
730
-361
-47
195
68
136
-2492
2599
-590
8537
5787
-1221
6793
4511
4222
6402
5868
11757
16985
31421
26159
15052

Table 4.1(a)
Linear Trends in India's Balance of Payments and its Components
Period

Current Account

Capital Account

BOP Account

I (1956-57 to 1975-76)

1.52 (0.096)

23.95 (1.88)

3.15 (0.56)

II (1976-77 to 1979-80)

-9.99 (1.86)

131.0 (0.356)

-151.0 (-0.34)

III (1980-81 to 1990-91)

-620.18 (-5.49)**

699.77 (9.35)**

79.75 (0.75)

IV (1992-93 to 2005-06)

334.08 (0.81)

1394.28 (3.89)**

1728.37 (4.13)**

Note: Figures in parentheses are t-values.

Table 4.2
Plan-Wise Analysis of Balance of Payments Position
Plan period

Current
Account
(US $Million)

Capital Account
(US $Million)

BOP Account
(US $Million)

First Plan
(1951-52 to 1955-56)

-17.8

-27

-117

Second Plan
(1956-57 to 1960-61)

-693

418.4

-1373

Third Plan
(1961-62 to 1965-66)

-835.6

801.4

-171

Annual Plans
(1966-67,1967-68,1968-69)

-999

1018.3

58

Fourth Plan
(1969-70 to 1973-74)

684.4

178

356

Fifth Plan
(1974-75 to 1978-79)

620

968.6

5462

Sixth Plan
(1980-81 to 1984-85)

-2658.2

2042.2

-4813

Seventh Plan
(1985-86 to 1989-90)

-5823.4

5821.2

-9

Eighth Plan
(1992-93 to 1996-97)

-3716.4

7577.6

3861.2

Ninth Plan
(1997-98 to 2001-02)

-2700.4

9252.6

6552

Tenth Plan
(2002-03 to 2006-07)

1104

21300.3

22404.25

Source: Based on data given in Table 4.1

69

Table 4.3
Selected Indicators of Balance of Payments Position (1950-51 to 2005-06)

Year

Balance of
Payments/GDP

Current
Account/GDP

Capital
Account
/GDP

1950-51
1951-52
1952-53
1953-54
1954-55
1955-56
1956-57
1957-58
1958-59
1959-60
1960-61
1961-62
1962-63
1963-64
1964-65
1965-66
1966-67
1967-68
1968-69
1969-70
1970-71
1971-72
1972-73
1973-74
1974-75
1975-76
1976-77
1977-78
1978-79
1979-80
1980-81
1981-82
1982-83

0.3
-1.64
0.17
0.42
-0.009
0.17
-2.23
-2.33
-0.29
0.05
-0.29
-0.37
-0.076
0.17
-0.23
0.07
-0.28
0.14
0.27
0.67
-0.02
0.04
-0.06
0.04
-0.67
0.81
2.09
1.97
1.08
0.30
-0.69
-1.48
-0.75

0.41
-1.62
0.60
0.44
0.06
0.07
-2.54
-3.42
-2.32
-1.26
-2.42
-1.79
-1.93
-1.67
-1.92
-1.99
-2.89
-2.36
-1.14
-0.59
-1.05
-1.11
-0.63
1.87
-1.34
-0.24
1.10
1.21
-0.24
-0.51
-1.70
-1.87
-1.93

-0.10
-0.02
-0.43
-0.02
-0.07
0.11
0.30
1.09
2.02
1.31
2.12
1.42
1.86
1.84
1.69
2.06
2.61
2.50
1.40
1.26
1.03
1.16
0.56
-2.34
0.67
1.04
0.99
0.76
1.31
0.81
1.01
0.45
1.19

70

Import Cover
of Foreign
Exchange
Reserves (FER)
19.0
10.8
16.7
18.4
15.5
14.0
7.4
4.1
4.4
4.7
3.3
3.5
3.2
2.9
2.1
2.6
2.7
3.1
3.9
6.2
4.8
5.0
5.2
4.4
2.9
4.2
7.4
9.9
9.2
7.3
5.0
3.4
3.6
Contd...

1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06

-0.29
0.39
-0.18
-0.02
0.08
0.03
0.05
-0.88
1.23
-0.13
3.43
1.98
-0.38
1.95
1.20
1.14
1.63
1.45
2.72
3.64
5.71
4.09
2.05

-1.67
-1.29
-2.39
-2.10
-1.99
-3.06
-2.60
-3.40
-0.38
-1.90
-0.47
-1.15
-1.83
-1.31
-1.50
-1.05
-1.15
-0.61
0.79
1.36
2.54
-0.88
-1.46

1.38
1.68
2.21
2.07
2.07
3.09
2.65
2.52
1.61
1.76
3.89
3.13
1.45
3.26
2.70
2.19
2.73
2.06
1.94
2.28
3.18
4.97
3.51

4.1
4.5
4.5
4.4
3.8
2.4
1.9
2.5
5.3
4.9
8.6
8.4
6.1
6.2
6.9
8.2
8.2
8.2
11.3
13.8
17.0
21.0
19.3

Source: Handbook of Statistics on Indian Economy, Reserve Bank of India (Various Issues).

Table 4.3(a)
Linear Trends in Selected Indicators of Balance of Payments Position

Period

Balance of
Current
Payments/GDP Account/GDP

Capital
Account
/GDP

Import Cover of
Foreign
Exchange
Reserves (FER)

I (1956-57 to 1975-76)

0.04 (2.33)*

0.0183 (0.56)

0.025 (0.93)

-0.43 (-4.32)**

II (1976-77 to 1979-80)

-0.63 (-5.15)**

-0.63 (-3.09)**

0.01 (0.007)

-0.10 (-0.14)

III (1980-81 to 1990-91)

0.073 (1.43)

-0.148 (-3.72)**

0.21 (6.66)**

-0.21 (-2.82)*

IV (1992-93 to 2005-06)

0.225 (2.43)*

0.15 (1.98)

0.07 (1.16)

1.06 (5.86)**

Note: Figures in parentheses are t-values.

71

Table 4.4
Plan-Wise Analysis of Selected Indicators of BOP Position

Period

Import
Cover of
Capital
Balance of
Current
Foreign
Account
Payments/GDP Account/GDP
Exchange
/GDP
Reserves
(FER)

First Plan
(1951-52 to 1955-56)
Second plan
(1956-57 to 1960-61)
Third Plan
(1961-62 to 1965-66)
Annual Plans
(1966-67,1967-68,1968-69)
Fourth Plan
(1969-70 to 1973-74)
Fifth Plan
(1974-75 to 1978-79)
Sixth plan
(1980-81 to 1984-85)
Seventh Plan
(1985-86 to 1989-90)
Eighth Plan
(1992-93 to 1996-97)
Ninth Plan
(1997-98 to 2001-02)
Tenth Plan
(2002-03 to 2006-07)

-0.17

-0.06

-0.086

15.08

-1.038

-2.26

1.368

4.91

-0.09

-1.74

1.77

2.89

0.04

-2.00

2.17

2.72

0.134

-0.28

0.33

4.76

1.056

0.1

0.95

6.72

-0.56

-1.52

1.14

4.12

-0.008

-2.16

2.41

3.4

1.37

-1.2

2.69

6.88

1.68

-0.66

2.32

8.72

3.87

0.5

3.48

14.25

Source: Based on data given in Table 4.3

72

Table 4.5
Balance of Payments Account (at Constant Prices)
(Rs.Crore)
Year

1980-81
1981-82
1982-83
1983-84
1984-85
1985-86
1986-87
1987-88
1988-89
1989-90
1990-91
1991-92
1992-93
1993-94
1994-95
1995-96
1996-97
1997-98
1998-99
1999-00
2000-01
2001-02
2002-03
2003-04
2004-05
2005-06
Pre-Liberalization Period
(1980-81 to 1989-90)
Post-Liberalization period
(1992-93 to 2005-06)
Whole Period
(1980-81 to 2005-06)

BOP/GDP

Capital
Account/Current
Account
(percent)

-0.63

59.35

-1.34

20.64

-1.13

35.12

-0.26

82.57

0.35

130.18

-0.27

87.29

-0.02

98.97

0.07

104.04

0.02

100.09

0.05

102.31

-0.79

74.26

1.11

425.51

-0.12

93.09

3.12

836.95

1.79

271.62

-0.34

79.19

1.77

248.76

1.09

179.74

1.15

218.77

1.42

236.59

1.31

338.59

2.48

244.53

3.35

167.57

5.22

125.04

89916.11
(-24.41)

3.71

1052.09

81481.71
(-17.99)
Mean

48975.39
(-45.53)

1.87

250.66

-14406.4

12485.8

-1920.50

-0.32

82.14

-7136.02

46879.4

40190.42

1.54

233.47

-10849.2

31657.09

17814.5

0.72

176.53

Current Account

Capital
Account

BOP
Account

-8741.69

5188.158

-3553.53

-10235.9
(17.09)
-11266.8
(10.07)
-10589.3
(-6.01)
-8624.94
(-18.55)
-17102.9
(98.29)
-15833.6
(-7.42)
-15929.8
(0.61)
-24357.1
(52.90)
-21381.7
(-12.21)
-34237.2
(60.12)
-3875.24
(-88.68)
-19961.9
(415.11)
-5280.2
(-73.54)
-13655.1
(158.61)
-23475
(71.91)
-18597.7
(-20.77)
-22848.6
(22.85)
-17337.9
(-24.11)
-20331
(17.26)
-10823.3
(-46.76)
14796.64
(-236.71)
26708.02
(80.51)
52852.36
(97.88)
-9444.11
(-117.87)

2112.799
(-59.27)
3957.11
(87.29)
8743.55
(120.95)
11227.73
(28.41)
14929.14
(32.96)
15670.67
(4.96)
16567.74
(5.72)
24586.35
(48.39)
21875.48
(-11.03)
25424.54
(16.22)
16489.3
(-35.14)
18584.01
(12.70)
44193
(137.80)
37088.92
(-16.07)
18590.27
(-49.87)
46264.11
(148.86)
41069.13
(-11.23)
37930.84
(-7.64)
48101
(26.81)
36619.89
(-23.86)
36182.67
(-1.19)
44754.66
(23.69)
66091.26
(47.67)

-8123.10
(128.59)
-7309.65
(-10.01)
-1845.79
(-74.75)
2602.79
(-241.02)
-2173.76
(-183.52)
-162.95
(-92.50)
637.90
(-491.46)
229.30
(-64.05)
493.76
(115.33)
-8812.63
(-1884.8)
12614.05
(-243.14)
-1377.93
(-110.92)
38912.79
(2724.01)
23433.82
(-160.22)
-4884.76
(-120.85)
27666.40
(-666.38)
18220.49
(-34.14)
20592.94
(13.02)
27770.0
(34.85)
25796.58
(-7.10)
50979.31
(97.62)
71462.69
(40.18)
118943.62
(66.44)

99360.22
(50.33)

-32506.3
(244.19)

Handbook of Statistics on Indian Economy, Reserve Bank of India (Various Issues)

Note: Figures in parentheses are annual rate of change.

Source:

73

Table 4.5(a)
Trends in Balance of Payments Account and its Components
BOP A/c =f (Time)

Current Account

Capital Account

BOP Account

BOP/ GDP

Pre-Liberalization Period

Post-Liberalization period

Whole period

(1980-81to 1989-90)

(1992-93 to 2005-06)

(1980-81 to 2005-06)

b0

b1

-5735.22

-1576.57

r2

b0

b1

-22647

2068.18

0.77
(3.03)

(-5.16)**

-682.01

2394.16
0.91

(-0.43)

(9.30)**

-6417.24

817.59
(2.81)*

-1.04

0.132

(-1.78)

(1.38)

16960.23

3989.22

(2.96)*

-38.82

-7.87

b1

-19941.0

673.46

(-2.78)

(1.45)

-4857.73

2704.81

(1.98)

(3.97)**

(-1.01)

(8.73)**

-25357.4

7938.91

-27432.8

3351.65

(2.91)

(5.48)**

-1.56

0.16

(-3.21)

(5.37)**

-70.94

-7.83

(-0.65)

(-1.11)

0.76

0.68
(-1.9)

(5.07)**

-1.13

0.356

0.56

0.56
(-1.47)

(3.95)**

-280.54

6.27

r2
0.081

0.57

0.52
(3.76)

b0

0.14

0.49
(3.56)

r2

0.55

Capital
Account/Current
Account

0.49
(2.22)

(-2.79)**

0.006
(-1.36)

(percent)

Source: Based on data given in Table 5.1

74

(0.26)

0.049