The sharp deceleration in the export growth in 1996-97 and 1997-98, notes the Survey, has, however, not affected the short-term viability of the external sector because the import growth also decelerated in this period and the net invisible receipts and net capital flows were buoyant.

The Survey expects a pick up in the import growth with the recovery in domestic investment and economic growth. Vigorous efforts will therefore be required to achieve a rapid growth of exports, especially in the context of the difficult international trading environment brought about by the recent currency crisis in South-East Asia.

Petroleum, oil and lubricants (POL) account for a relatively large share of total import bill and there is considerable uncertainty about the future movements of international prices of petroleum. Efficiency of usemust be encouraged and distorting policies eliminated, the Survey warned.

The Survey has also called upon the central and state governments to sustain and intensify efforts to attract tourism, which has been a major source of invisible earnings on the current account of balance of payments. Growth of tourist arrivals earnings has received a sharp setback in 1996-97 and 1997-98.

Besides, India, the Survey recommends, needs to maintain a positive stance towards direct foreign investment in order to strengthen the balance of payments and to garner more foreign savings to support the investment needs of the economy.

The Survey attributes the slow down in export growth in the last two years to the deceleration in the rate of growth of world exports in 1996 and 1997 to 3.7 per cent following two years of high growth (19.8 per cent in 1995 and 13.7 per cent in 1994. Exports by developing countries grew by only 5.9 per cent in 1996 against 21.5 per cent in 1995 and 16.5 per cent in 1994.

This indicates thatlike India, the fast growing Asian exporters also suffered considerable decline in export growth in 1996. Imports into the advanced economies which are India's major trading partners slowed, reflecting a slow down in economic growth. The growth rate of imports by advance economies declined from 13.4 per cent in 1994 to 18.2 per cent in 1995 to 3.6 per cent in 1996. Imports by the US and Japan, the two largest export destinations, grew by only 6.6 per cent and 4 per cent, respectively, in 1996. Germany's imports declined in absolute dollar value. This slow down adversely affected India's exports in 1996-97.

The rupee's appreciation, in real terms, in 1997, against the currencies of India's major partners, and the failure of world import growth to recover contributed to the lack of recovery in export growth.