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External economy — always challenging
- The current preoccupation of policy makers on controlling inflation is entirely justified but should not obscure the fact that certain other sectors too require attention.
- Management of the external economy has been a bright spot in the overall macroeconomic scenario at least since the beginning of economic reform (early 1990s).
- The sweeping changes introduced then covering foreign trade, foreign investment, exchange rate and reserves have served the country well.
- The calibrated approach to capital account convertibility and controls over capital flows were criticised as being too conservative.
- Besides, as a general rule it is naive to think that any economic issue however serious and politically sensitive — which inflation certainly is — can be examined and countered in isolation. For example, high global commodity prices, including those of petroleum are driving up inflation
- There has been a slowdown in the global economy and Indian exporters who have traditionally depended on the large markets of the EU, the U.S. and Japan have had a challenging task.
- Europe's debt problems for long simmering have come to a boil. Both U.S. and Japan have been witnessing lower than expected growth rates.
- Trade with Africa, Latin America and a few other non-traditional areas has been on the rise thanks to supportive government policies
- Exports grew by 38 per cent to touch $250.5 billion in 2010-11.
- Despite strong export growth, the trade deficit has increased to $130.5 billion in 2010-11 from $118.4 billion in the year before
- In India, invisible receipts have played a major role in reducing the size of the current account deficit.
- foreign direct investment (FDI) has come down sharply from $33.1 billion to $23.4 billion
- debt creating flows represented by external commercial borrowings (ECBs) and foreign currency convertible bonds (FCCBs) went up
- The Prime Minister's Economic Advisory Council (PMEAC) in its Economic Outlook (July 2011) projects that merchandise exports at $330 billion (BOP basis) will grow by 32 per cent in 2011-12, while imports at $484 billion would expand by 27 per cent leaving a merchandise trade deficit of $154 billion or 7.7 per cent of the projected GDP.
CMIE cuts industrial production growth forecast to 8.2 per cent
The Centre for Monitoring Indian Economy (CMIE) has scaled down its forecast for the industrial production growth in 2011-12 to 8.2 per cent from 8.7 per cent earlier.
