Bop Projections May Go Haywire

Export growth has decelerated to 10 per cent in April-August, while growth in imports in this period has dropped to 5 per cent. The Reserve Bank had projected a growth of 17 per cent in exports and 15 per cent in non-oil imports.

The trend in oil imports is particularly alarming with the growth in the first five months averaging over 40 per cent as compared to the 17 per cent increase projected by the RBI.

The petroleum ministry, in variance with the RBI, has predicted that the oil import bill in 1996-97 is expected to touch an uncomfortable level of $9.5 billion as compared to about $7.5 billion in 1995-96.

 

The higher outgo under oil imports is due to a decline of 2.5 million tonnes in domestic production, increase in import price from $16-17 to $21-22 a barrel and the 4 per cent depreciation in the value of the rupee.

The actual level of oil import bill in the current financial year seems to be consistent with the projections by the petroleum ministry. The rise in imports was 50 per cent in April, 48 per cent in April-May, 44 per cent in April-June, 42 per cent in April-July and 39 per cent in April-August.

At the end of August, the oil import had climbed to $3.7 billion. The growth in the oil bill has averaged about $700 million in each month of the current financial year.The adverse performance on the trade front is significant since the country is to discharge a peak debt-service obligation of $14.5 billion in the current year. Any pressure on the current account of the balance of payments will have to be offset with enhanced flows in the capital account.

The central bank has projected that inflows under external assistance will slow down further and will average about $1 billion in 1996-97. The net inflows under external commercial borrowings will pick up and average $2.2-2.6 billion.Inflows under non-resident Indian schemes will continue to average about $1 billion. Accruals by way of FII investments were expected to aggregate about $2 billion, while Indian corporates will be able to raise $1-1.5 billion in the year, sources said.

The government's expectations are that the external financing needs in the current year are in the region of $8 billion. This it expects to be financed through the projected capital inflows.