According to the Reserve Bank of India (RBI) officials, the deterioration in trade deficit was not being reflected in the forex exchange reserves position and hence there was no need to be alarmed about it. RBI also feels that the marginal deterioration in the current account deficit can be managed and there will be no perceptible adverse impact on the external sector on that count. The current account deficit might go up to about 2.75 to 3 per cent of the GDP at the end of fiscal from 1.7 per cent recorded during 1997-98.

The trade deficit has deteriorated on account of poor performance of exports which witnessed a fall of 3.28 per cent during April-September 1998. The exports during the corresponding period last year were up by 4.22 per cent.Sliding exports coupled with import growth rate of 10.06 per cent during the same periodresulting in doubling of the trade deficit. The trade deficit was of the order of $ 4.99 billion at the end of September as opposed to $ 2.5 billion at the end of six months last fiscal. The trade deficit during 1997-98 worked out to be $ 6.8 billion. As far as the current year was concerned, the trade deficit was likely to deteriorate further with the prospects of any upsurge in exports being ruled out in the short run due to worldwide recession.