In the article, "Welcome NRIs & ECBs" (April 13), A K Bhattacharya has succinctly analysed the economic growth of the country by dividing its political governance into three phases. According to the writer, phase I was from 1990-91 to 2003-04, phase II from 2004-05 to 2012-13 and phase III from 2013-2014 to the present day. The third phase accounts for only about two years.
Economic growth was spectacular in the first and second phases of governance. The external debt stock has risen one per cent during the third phase and so has the country's balance of payment - to around $360 billion of gross domestic product. The third phase has promised a large number of second generation reforms that are yet to be tested; hopefully, they will fructify if the Narendra Modi government manages to carry the Opposition along with it through proper handling and articulation.
Read more from our special coverage on "ECONOMIC GROWTH"
Bhattacharya says "the big change in India's long-term debt profile is with regard to its commercial borrowings and deposits from non-resident Indians or NRIs. Commercial borrowings accounted for 27 per cent of India's total external debt in 2010 and they have risen to over 38 per cent by the end of December 2015. Similarly, NRI deposits accounted for 18 per cent of external debt five years ago. Today, they have a share of 24 per cent".
The writer seems to be in doubt whether the slowing of the short-term debt and the boom in external commercial borrowings (ECB) and NRI deposits are healthy signs for the economy.
As an international trade researcher, I can vouchsafe that by using time series data to test the factors - exchange rate, interest rate differential and real domestic activity drive - it will be found that Indian corporate foreign borrowings share a positive relationship. This is a healthy sign for the Indian economy.
P K Vasudeva Sydney
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