Expert Zone

Straight from the Specialists

Remittances support to balance of payments


(The views expressed in this column are the author’s own and do not represent those of Reuters)

For quite some time now, exports of goods have trailed behind imports leaving a huge deficit which has been partly made up by the surplus in services trade, an important component of which is remittances from overseas.

In 2010-11, with the surplus in services trade the current account deficit was reduced to 2 trillion rupees. The surplus in services trade comes mainly from household remittances from overseas which exceeded 2.1 trillion rupees. Remittances brought down the goods account deficit by 41 percent.

Remittances from overseas have been substantially more than even FII investment. In 2010-11, which was one of the good years for FIIs, inflow of investment was 1.3 trillion rupees, about half of the remittances that came in. FII and FDI together more or less matched the remittances from abroad.

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