A central area of concern identified by the BJP-led coalition government is the slowdown in exports to a growth of 2.6 per cent in 1997-98, even as the Economic Survey points out that the export growth rate in SDR terms is 6.7 per cent.
In this context, the government has stressed the need for maintaining a market responsive exchange rate determined by fundamental demand and supply factors while containing any short-term volatility.
The government has said that vigorous efforts to push up exports would be required. It also argues that efforts to raise invisible surplus through tourism needs to be intensified.
Interestingly, the last survey (1996-97) had predicted an export growth rate of 8-10 per cent in 1997-98. Among the reasons for the slowdown in export growth are the slower growth in world trade, the real appreciation of the rupee vis a vis India's trading partners and the sharp depreciation of the currencies of some of India's potential competitors in Asia like the Philippines, Indonesia and Thailand. A decline in the export prices of some major items of manufactured goods has also contributed to this fall.
Imports into advanced economies which are India's major trading partners (56 per cent of India's exports are in dollars) slowed down.
The growth rate of imports of advanced economies declined from 13.4 per cent in 1994 and 18.2 per cent in 1995 to 3.6 per cent in 1996. Imports of US and Japan grew by only 6.6 per cent and 4 per cent respectively in 1996. Germany's imports declined in absolute dollar value.
Import growth has also decelerated to 6.7 per cent in 1996-97 and to 5.8 per cent in 1997-98, primarily due to the weak domestic demand and a slowdown in industrial activity.
The survey points out that POL accounts for a relatively large share of the total import bill and there is considerable uncertainty surrounding the future movements of international prices of petroleum. Efficiency of use must be encouraged and distorting policies eliminated, the survey argues.
Faced with this, the trade deficit widened from $ 2.3 billion in 1994-95 to $ 5.6 billion in 1996-97, and further to $6.8 billion in 1997-98. The trade deficit in 1996-97 was 4 per cent of the GDP, up from 3.4 per cent of GDP in 1995-96. Based on provisional DGCIS data, the ratio of exports to imports in 1997-98 is around 83.3 per cent, up from 70 per cent in 1996-97.
The survey also points out that the import of gold under the gold import scheme for 11 nominated agencies has increased from 14.2 tonnes in November 1997 to 62.3 tonnes in March 1998.
