India'S Debt Service Ratio Dips To 26%

Speaking at the annual general meeting of Indo-American Chamber of Commerce here, Talwar said the policy initiatives in trade, exchange rate, foreign investment and industrial policy regimes and endorsement of international confidence in India has effected a change in the composition of capital flows.

During 1994-95, foreign investment flows constituted more than 55 per cent of net capital flows, Talwar said.

Portfolio flows which were non-existent until 1991-92 rose to $2.1 billion in 1995-96. Several corporates have successfully issued GDRs and less volatile foreign direct investment has also received an impetus.

Talwar said all these development together have resulted in a sustainable balance of payments which, in turn, is manifested in the appreciable decline in debt service ratio.

 

Underscoring the success of the policy initiatives, Talwar said the current account deficit has been brought down from $ 9.7 billion or 3.2 per cent of GDP in 1990-91 to $ 5.5 billion or 1.7 per cent of GDP in 1995-96.

Foreign currency assets were as low as $ 1 billion enough to fund just two weeks of imports is now enough to finance over five months of imports.

Talwar said the contribution of export growth to this resurgence was substantial as it has averaged 18 to 20 per cent growth in dollar terms from 1993-94 to 1995-96. The increase in import demand resulting from the higher industrial growth has been accommodated by the improved export performance coupled with enhanced invisible receipts, Talwar said.

With the present rapid growth, infrastructure is coming under increasing strain, the deputy governor felt.

The manufacturing sector which grew at about 13.9 per cent, was the major contributor in the record achievement last year.

You will agree the economy and more so the manufacturing sector cannot sustain this rate of growth without substantial investments in infrastructure, Talwar said.

He felt power roads and ports are areas which need immediate attention.

The 245 proposals submitted by the independent power producers reportedly envisage investments of over Rs 3,39,700 crore. Talking about Indo-US trade, he said the trade between the two countries grew from $2.8 billion in 1990-81 to $9.4 billion in 1995-96.