• MAY 2, 2000

India turns in a mixed foreign trade performance

India's export performance during FY00 has been mixed. While exports have clocked a growth of over 11%, imports have grown by 10%. The result has been a marginal 5% rise in the trade deficit.

Although the export growth seems commendable in comparison to the negligible growth recorded in FY99, it is still much lower than the targeted levels of over 20%. Thus there is a need to take measures to propel India into a high growth area in this field. This would require large investments in infrastructure, brand image and technology (to improve competitiveness).

Similarly on the import front, although the marginal growth has helped put a lid on the trade deficit, several concerns remain. Almost all the rise in imports is on account of the oil bill, which increased mainly due to a surge in oil prices and a rise in crude demand (as several new capacities went on stream in India). This highlights the fact that non-oil imports (including capital imports) have remained more or less stagnant, reflecting on the low level of investment activity in the domestic economy.

A higher trade deficit, especially if fueled by higher capital imports, would not have been totally undesirable given the stage of economic recovery that we are in, where in order to sustain growth, a pick up in investments is a must.

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