Bop Position Comfortable: Rbi Chief

The Governor said that the external financing needs of $8 billion -- which is consistent with the current account deficit target of 2 per cent of GDP -- would be achieved, with higher inflows from foreign investment expected in the current financial year.

The level of foreign exchange reserves would have to be maintained at $17 billion -- sufficient for four months of imports.

Delivering the Vakil memorial lecture organised by Ficci, Rangarajan said that the total foreign investment inflows -- consisting of portfolio, GDR receipts and foreign direct investment -- in 1996-97 would aggregate $7.5 billion.

The accruals under FII investments was $1.5 billion at the end of July, while foreign direct investment has aggregated $531 million at the end of June. In the case of GDR receipts, the country had already crossed the levels attained in 1995-96, he added.

 

The net inflow of external commercial borrowings had dec-

lined in the current fiscal year on account of large repayments. This was likely to improve after the current fiscal year -- when debt service is expected to peak at $14.5 billion.

According to the RBI Governor, the targets for the current account deficit were based on the assumption that exports would grow at 16-17 per cent and imports at 14-15 per cent. If this was accompanied with certain compositional shifts in the capital account in favour of non-debt flows, he projected that debt-service ratio would drop to 20 per cent in the next five years.

The Governor projected that inflows under external assistance would slow down further and would average about $1 billion. The net inflows under external commercial borrowings would pick up and average $2.2-2.6 billion, he said.

According to the Governor, inflows under non-resident Indians would continue to average about $1 billion.

Rangarajan argued that the concerns on foreign direct investment were unfounded and the country would be able to achieve an annual inflow of $5 billion by 2000.

Inflows by way of FII investments was expected to aggregate about $2 billion, while Indian corporates would be able to raise about $1-1.5 billion every year.

On the trade account, the Governor has targeted an annual rate of growth of 17 per cent for exports and 15 per cent for invisibles. The targets for non-petroleum imports at 15 per cent and oil imports at 17 per cent. The outgo for oil imports was expected to touch $13 billion by 2000, as compared with the current level of $7.5 billion.

Going by these projections, the governor said that the external financing needs (consistent with a current account deficit of 2 per cent of GDP) would rise from $8 billion in the current fiscal year to $15 billion by 2000.