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What Is India News Service
Tuesday, January 16, 2007



 

 

 

 Economic Outlook for 2006-2007

  Prime Minister Manmohan Singh’s high-powered economic advisory council (EAC) presented their economic outlook projecting current account deficit (CAD) of 1.5%, foreign direct investment inflow of USD 9 billion, and reserve buildup of USD 22.6 billion.
 

 

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Prime Minister Manmohan Singh’s high-powered economic advisory council (EAC) presented their economic outlook projecting current account deficit (CAD) of 1.5%, foreign direct investment inflow of USD 9 billion, and reserve buildup of USD 22.6 billion. Estimating GDP to be USD 900 billion, EAC says that CAD to be USD 20 billion because prior year estimates based on first year projections had always resulted in off-key figures reducing the credibility of the data. Hence, this time around, EAC has used a blanket percentage of GDP approach.

The EAC also noted a better coordinated reporting of balance of payments (BoP) numbers from Directorate General of Commercial Intelligence and Statistics (DGCI&S) and Reserve Bank of India (RBI) by nearly 50% thereby increasing the credibility of the data. The team of experts also informed Singh that for the first time FDI inflows was larger than portfolio capital flow with inflows of USD 12 billion and outflows of USD 3 billion.

Another heartening feature in the BoP outlook is that for the first time in several years, net FDI is projected to be larger than portfolio capital flow. Net FDI this year will be around $9 billion, up from $4.7 billion last year. The net figure results from in-bound FDI of around $12 billion and out-bound FDI of $3 billion. In addition, they predict that there will be an accretion to reserves by nearly 50% to USD 22.6 billion of which USD 8.6 billion has already been absorbed in the economy in the first half and another USD 6-7 billion has already come in the third quarter.

The increased imports and exports has taken the total ratio of trade with respect to the GDP to 35.9% (up from 32.8% last year) which could be 39% if software exports are added to the export figure.

The EAC’s Actual and Project Summary Balance of Payments is provided in the table below:

(in US$ billion - except where otherwise indicated)

 

Reported

Projected for full year 2006/07

 

2004/05

2005/06

H-1 2006/07

 

Merchandise Exports

Merchandise Imports

82.2

118.8  

105.2

157.0

60.6

95.7

128.4

194.3

Merchandise Trade Balance

–36.6 –51.8 –35.1 –65.1

Percent of GDP

Net Invisibles

(–5.3%)

31.2

(–6.5%)

42.7

(–7.8%)

23.5

(–7.3%)

52.5

o/w Software

Remittances

Investment Income

16.5 

20.3

–2.7

22.6

24.1

–4.9

12.1

11.2

–1.8

28.5

26.5

–3.5

Current Account Balance

Percent of GDP

–5.4

(–0.8%)

–9.2

(–1.2%)

–11.7

(–2.6%)

–13.4

(–1.5%)

Foreign Investment

o/w FDI (net)

Portfolio capital

12.1

3.2

8.9

17.2

4.7

12.5

5.8

4.2

1.6

16.0

9.0

7.0

Loans

Banking capital

Other capital

10.8

3.9

4.7

6.1

1.4

–0.7

7.4

3.2

3.0

14.0

4.0

1.0

Capital Account Balance

Percent of GDP

31.0

(4.5%)

23.4

(2.9%)

19.3

(4.3%)

35.0

(3.9%)

Errors & Omissions

Accretion to Reserves

0.5

26.2 

0.8

15.1

1.0

8.6

1.0

22.6

GDP mp (Rs crore)

 3,121,414

3,530,319

1,994,630

3,989,260

GDP mp (US$ billion)

695    

798

451

902

Note: Figures in parentheses refer to the proportion to GDP; for half-year periods it is the proportion to GDP assuming equal distribution of GDP at market prices for the two halves of the year.

 

 

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