The Reserve Bank of India has been successful in its endeavour to stem the panic on the rupee front, but the `fundamentals' now no longer seem so sound as they are made out to be. December's export performance has been lacklustre, with exports dropping by 5.5 per cent compared to December 1996.They increased in rupee terms, reflecting the depreciating rupee. Exports had fallen by 10.1 per cent in April, on a year-on-year basis, but they had remained in positive territory throughout the rest of the year. The slump in December, therefore, is definitely a dampener. On the other hand, import growth has picked up substantially. Imports during December increased by 11.91 per cent, substantially higher than the growth recorded in the previous months. During the April to December period, exports were up 3.3 per cent compared to the corresponding period of the previous year while oil imports are up 14.7 per cent, and non-oil imports have increased by 15 per cent. Add to this dismal scenario the fact that FIIoutflows have continued for January, while the prospect of further injections of foreign borrowings via the ECB route is now closed. The only silver lining for the rupee seems to be the increased FDI flows. However, that may well be a flash in the pan, as foreign investors discover assets going dirt cheap in south east Asia and Korea. The last quarter of the fiscal year usually sees a higher level of imports, and that could result in pressure on the current account. This could well be exacerbated by the fact that the cost of capital equipment has come down substantially, and Indian companies could try to take advantage of that fact.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
