Exports are expected to grow at an average of 8.2 per cent during March, April and May while the growth in imports is expected to be at an average rate of 15.03 per cent for these three months, according to the Monthly Monitor of the Institute of Economic Growth.
Import growth which was moderate, recorded a whopping 22 per cent growth against a negative 10 per cent in the same month of the previous year. The oil import bill recorded 59 per cent growth whereas non-oil imports remained sluggish and posted only 1 per cent growth during the same period, states the report.
However, the recent impact by OPEC members to relax oil output by 7 per cent has resulted in a 30 per cent fall in the international oil price. This may cause some deceleration in the oil import bill, it says. The institute expects the exchange rate to be 43.62 in April, 43.75 in May and 43.86 in June 2000.
More From This Section
On inflation, a sharp increase in prices of manufactured commodities is quite unlikely because of the steep competition offered by cheap imports, says the report. Apart from this, India is also getting integrated with the rest of the world on a larger scale, as more and more items including agricultural commodities are being put on the OGL list. This is expected to reduce the divergence between world and domestic inflation, says the Monthly Monitor.
However, the CSOs forecasts of a fall in foodgrain production by 1.9 per cent in 1999-2000 may create expectations and push up the prices of primary articles to some extent, it says.
The reports forecasts inflation rate based on the CPI to be 4.1 per cent in April and 4.22 per cent in May. The recent liberal monetary policy announced by the RBI is unlikely to put much pressure on prices from the demand side, provided the government continues to borrow on a large scale from the market, it adds.
Because of sluggish tax collections and rising current expenditures, fiscal deficit is also increasing and the government is resorting to market borrowings to finance this deficit.
This has opened up risk free investment opportunities for banks in government securities and pushed up the interest rates on government securities, says the report. If the government does not reduce its scale of borrowing from the market there is little scope for any significant fall in the treasury bill rate.