The Trade Conundrum

According to National Council of Applied Economic Research chief economist Shashank Bhide, data compiled by the council reveals that private investment in nominal terms fell to around 18 per cent in 1996-97 from 28 per cent in 1995-96, primarily due to high interest rates. Bhide says this drop in investment has manifested itself in lower imports of machinery and project imports.

However, Planning Commission economist Pranab Sen argued that non-oil imports and overall export growth should not be evaluated in dollar terms, since this is not an accurate measure in a year when the dollar has appreciated sharply against all other currencies.

 

Sen said the non-oil imports growth rate would work out to 7.5-8.0 per cent if measured in terms of special drawing rights (SDR) rather than dollar terms. If oil imports are included, overall import growth would amount to around 13-14 per cent, he added.

Sen maintained that the performance of exports is not as dismal as it appears, since last years export growth rate of 21.4 per cent occurred largely because of dollar depreciation. If measured in SDR terms, export growth in 1996-97 would work out to 14 per cent against 16.5 per cent in 1995-96, he argued.