The government has targeted a current account deficit of 1.5 per cent of gross domestic product in its balance of payments outlook for 1998-99. Foreign currency reserves are projected to grow by $2-3 billion.
Other targets include 5-7 per cent growth in exports, 10-12 per cent in imports, and inflows of $4 billion in foreign direct investment (FDI). In 1997-98, Indias exports rose 2.6 per cent and imports 12 per cent . FDI accruals amounted to $3.2 billion, compared with the projected $4 billion.
The government continues to be worried about exports , and believes that the poor trends witnessed in 1997-98 will improve only marginally in the current year. According to officials, the global outlook for trade continues to be bleak, and, to make matters worse, the Southeast Asian countries, buoyed by the steep currency depreciation, are expected to make a comeback by the end of the year.
The Reserve Bank believes that the buoyancy in private transfer receipts witnessed in the past two years will be sustained. It argues that the record surge of $10 billion in 1996-97 was an outcome of the introduction of full convertibility of the rupee on the current account. This has taken away the margins from the unofficial trade in foreign exchange.
The government also believes that the current fiscal year should continue to see non-debt creating foreign capital inflows. In 1997-98, the annual accretion to reserves was of the order of $3.6 billion from the end-March 1997 level of $22.4 billion. This is compared to the increase of $4.6 billion recorded in 1996-97.
In fact, the government had initially anticipated a much higher level of accretion, with the first quarter of 1997-98 seeing reserves rise by $3.03 billion. These trends, however, were drastically altered by the continuous pressure on the rupee and the subsequent RBI intervention in the forex markets.
In the current year, while it expects FDI inflows to be marginally higher than the 1997-98 levels, the government also expects accretion in the form of investments in global depository receipts. With the government targeting Rs 5,000 crore (equivalent to $1.2 billion) in disinvestment of several blue-chip public sector undertakings, it expects the interest of foreign institutional investors to be sustained.
The government does not also perceive any substantial build-up in the external debt status of the country. According to the latest available statistics, the country
