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Mumbai, Sept 4: The Reserve Bank of India has voiced its concern over the widening in the current account deficit to 1.7 per cent of the gross domestic product (GDP) in 1997-98 from 1.2 per cent in the preceding fiscal. Current account deficit in 1997-98 stood at $6,473 million, up from $4,494 million in 1996-97 "mainly on account of a weakness in export performance." The central bank has called for "a sustained improvement on the export front."
Harping on the south-east Asian meltdown and its impact on the Indian economy, the Reserve Bank has called for a continuous monitoring of the external current account deficit position. However, it said that a marginal rise in current account deficit to about 2 per cent of the GDP in fiscal 1999 -- up from 1.7 per cent in 1997-98 -- is sustainable, given the flow of capital and invisible receipts.
The current receipts to GDP ratio, which had recorded a healthy trend since 1992-93 to 1996-97, declined in 1997-98. The debt-service ratio declined to 19.5 per cent in1997-98 from 21.2 per cent in 1996-97, mainly on account of amortisation. Both exports and imports decelerated during the year, but the trade deficit increased to $6,799 million in 1997-98 from $5,663 million in 1996-97.
Provisional data released by the Directorate General of Commercial Intelligence and Statistics during 1997-98 puts the country's exports at $33,980 million, an increase of 1.5 per cent, but sharply lower than the 5.3 per cent registered in the preceding fiscal.
"A host of internal and external factors, particularly domestic infrastructure constraints, slackening in the domestic economic activities, steep decline in manufacturers' prices in dollar terms and the south-east Asian currency crisis contributed to the poor performance in exports," states the Reserve Bank's annual report for 1997-98.
Manufactured exports decelerated to 3.3 per cent in 1997-98 from 4.7 per cent in 1996-97, reflecting a sharp decline in the international prices of manufactured exports in dollar terms. Primaryexports, on the other hand, declined by 7 per cent in 1997-98 against an increase of 10.7 per cent in 1996-97. The country's exports to Indonesia, South Korea, Malaysia and Thailand declined by $423 million in 1997-98 compared with increases $674 million and $112 million in 1995-96 and 1996-97, respectively. Value of exports to Japan, United States, United Kingdom and Germany, too, were affected with a fall in the international prices of goods.
The saving grace on the exports side were those in software, which surged by nearly 55 per cent to $1,700 million from the 45 per cent in 1996-97. "The strong growth in software exports is noteworthy in view of its imperviousness to exchange rate movements and depressed regional markets in contrast to merchandise exports," the report states.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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