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'BoP: Some grey areas remain' - Economic Survey - Views on News from Equitymaster
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  • Feb 29, 2000

    'BoP: Some grey areas remain' - Economic Survey

      The Current Account
    • Exports have grown by 12.9% during April - December 1999 in US$ value terms. The growth of imports has been lower art 9%, despite the surging oil prices (import value of oil grew 58%). This has been largely due to a sharp decline in imports of precious metals - gold and silver, and a 30% drop in the imports of capital goods

    • In the invisible goods category, the software sector continued to log in 50% growth rates.

    • As a consequence of the adverse external climate (oil imports), the current account deficit is expected to widen to 1.6 - 1.8% of GDP (FY99: 1% of GDP).

      The Capital Account of the Balance of Payments

    • During April - September 1999, total inflows were US$ 4.3 bn as compared to 3.1 bn in the corresponding period last year.

      US$ m April - Sept 98 April - Sept 99
      Portfolio investments (FII) (540) 1,349
      Non resident deposits 46 932
      Foreign direct investment (FDI) 1,408 1,057
      External commercial borrowings ECB) 4,328* 62
      * including US$ 4.2 bn from Resurgent India Bonds (RIB)

    • The war like situation in Kargil and the uncertainity in the political situation seems to have adversely affected the inflow of funds into the country. However, as is evident from the euphoria in the stock markets, FII inflows have continued unabated.

    • The Economic Survey has drawn attention to the slack in FDI given that the government has set a target of US$ 10 bn per annum of FDI inflows. It has been stated that with the government expanding the automatic approval system, the FDI inflows can be expected to pick up.

      Foreign Exchange Reserves

    • The forex reserves had increased by over US$ 2.4 bn by the end of January 2000. The external situation continues to be stable.

      One key fact brought out by the Economic Survey is that there has been a sharp fall in the imports of capital goods during the year. This is of prime concern as it signifies that investment activity in the domestic markets has yet to pick up. The sustainability of economic growth is determined by both consumption and investment activity and therefore a further delay in the pick up the latter could jeopardise the upturn in domestic economic activity.

      Source: Economic Survey 2000, Ministry of Finance



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