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External Trade Making Marks Despite High ImportsWednesday, February 28, 2007
A hike in import bills, on an account of shooting up oil prices and trade deficit should not cause problem as investment inflows and external trade is riding growth wave, says the Economic Survey on Tuesday. The Current Account of the balance of payments had been turning out in deficit for the last few years and is likely to remain in deficit in 2007 as well, as told by Finance Minister, P. Chidambaram. The deficit may go down if exports of goods and services continue to flourish, including information technology sectors, and slowing down of imports. However, invisible account remains strong along with stable capital flows flawlessly financing the moderate levels of current account deficit. This keeps the overall external environment in its growth orbit, which is expected to remain supportive of India’s growth momentum. The current account deficit, which was $9.2 billion in 2005-06, touched $11.7 billion in the first half of 2006-07 largely due to a 36.3 per cent growth in imports. The growth was due to a surge in value of oil imports, while non-oil imports softened due to high prices of gold and silver in international markets. The current account deficit was marked at $9.2 billion in 2005-06 as against $11.7 billion in the first half of 2006-07, that became possible due to a decent growth in imports, while non imports was not able to caught the pace due to probative prices of gold and silver in international markets. Exports excelled by the resurgence in the production sector and growing demand from major trading partners, say the economic survey. Net invisible inflows were evaluated to be $23.5 billion whereas they were $19.9 billion in the last fiscal. The values include travel, transportation, and remittances from overseas. The deposits by NRIs also made a mark this fiscal year and grew to $2.03 billion from $233 million in 2006. Other factors, deciding about the country’s balance of payments, also picked up a nice pace. Foreign Direct Investments (FDI) into the country in April-September 2006 hit $4.2 billion from $2.1 billion in the last fiscal. Not in staying step with the FDI, net portfolio investments dropped from $5.4 billion in April- September 2005 to $1.6 billion in the first half of current fiscal.
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