Current account deficit not to top 2%

the global slowdown is expected to affect india on the exports front, although the severity of the impact would be milder because india's trade, as a percentage of gdp, is just under 21 per cent, relatively low compared to other emerging markets. as a result, the central bank feels, no severe pressures are likely on the balance of payments, with the current account deficit expected to be contained well within 2 per cent of gdp. the slowdown in the first eight months of the year 2001 in major industrialised countries and emerging economies has already taken its toll on india's exports, which was $17.1 billion for april-august 2001 -- a decline of 2.3 per cent over the corresponding period last year. reflecting the domestic slowdown, however, imports also registered a much slower growth of 2.5 per cent as against an increase of 13.8 per cent last year. a huge portion of this is accounted for by a decline in oil imports by 6.1 per cent in dollar terms compared to a large increase of 78.7 per cent in the corresponding period last year. the trade deficit for the first five months of this year, at $4.6 billion, was $0.9 billion higher than the deficit in the same period last year. with no recovery in the global scenario expected in the near future and the domestic industry facing a continuing slowdown, the direction of the trade deficit would crucially hinge on movements in oil prices. the oil import bill for 2001-02 is expected to be in the range of $17.5-18.0 billion as against actual imports of $15.6 billion in the previous year. but this is subject to an important caveat that average oil prices for the rest of the financial year remain at around $25.0 per barrel. however, developments on the political front and the stance of opec countries subsequent to september 11 attacks would then have to be carefully watched. on the issue of a high fiscal deficit in 2001-02, the governor's statement is suspiciously nonchalant. in previous credit policies including the one in april this year, the governor had clearly emphasised that a large and growing borrowing programme tends to come in the way of monetary management and puts pressure on the absorptive capacity of the market. this year so far, the centre has completed around 86 per cent of its targeted net borrowing and about 80 per cent of its gross borrowing for the fiscal. the gross fiscal deficit as a proportion of gdp so far has been higher at 2.3 per cent as against 1.7 per cent in the corresponding period of the previous year. up to august 2001, the gross fiscal deficit of the centre stood at rs 56,079 crore, constituting about one half of the budget estimate for the current year. from the fiscal consolidation point of view, the suggested dilution of the fiscal responsibility bill by the standing committee on finance is likely to put further pressure on the rbi in its role as 'banker to the government'. the committee has suggested elimination of the clause restraining the rbi from subscribing to government securities from april 1, 2004.

Current account deficit not to top 2%

THE GLOBAL slowdown is expected to affect India on the exports front, although the severity of the impact would be milder because India’s trade, as a percentage of GDP, is just under 21 per cent, relatively low compared to other emerging markets. ...

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