NEW DELHI, India, Nov.23, and Reuter: India, its economy battered by a severe drought, will post a sharply higher trade deficit due to rising imports of crude and edible oil, a senior ‘world bank official said on Monday.
The official said that despite rising imports, India’s merchandise trade deficit will shoot up to seven billion dollars in fiscal 1987788 ending March from 6.38 billion last year ~ a 10 percent rise.
“Indian exports have not been affected, in fact they have reformed better than the world average. But India has had to import much more this year because of the drought”, said the official who did to want to be identified.
The official said imports will rise to 18.5 billion dollars from 168 billion and exports to 11.5 billion from 105 billion.
‘The Indian government has yet to give an estimate of this year’s trade balance, but economists say the deficit will rise by at least 10 billion rupees (770 million dollars) due to the drought, the worst to hit India this century.
Weak monsoons last June to September have devastated oilseed, cotton and rice production across India while severe floods also wiped out vast crop areas in the Northeast.
Indian government figures = show the country’s trade deficit rose to 75.15 billion rupees (5.78 billion dollars) last year from 87.54 rupees (6.73 billion) in 1985/86)
Western estimates of India’s trade balance often differ from those of the Indian government.
The World Bank officials said imports of crude oil and petroleum products would post the highest rise in dollar terms because of the world oil price increase.
Bank estimates show the import bill for these items hitting 3.3 billion dollars compared with 2.1 billion in 1986/87, when world prices fell sharply, he said. The bill is expected to rise further to 3.5 billion dollars in 1988/89.
India’s crude oil imports will rise to 17.5 million tonnes worth 23 billion dollars in 1987/88 from 15.5 million tonnes worth 1.6 billion in 1986/87, the official said.
Western analysts say India needs to import more oil because hydroelectricity generation in the Northern States of Punjab and Haryana has fallen as dam water has been diverted to crop areas.
The World Bank has estimated that Indian edible oil imports will rise to 705 million dollars this year but the official said it could hit one billion dollars in 1987/88.
Industry experts say India’s oilseed crop this year will fall to 10 million tonnes from 11.5 million last year because drought has sharply cut groundnut crop production.
The official said the trade situation could have worsened if not for higher Indian exports, which will climb about 10 per cent in dollar terms, the official said.
“The growth rate of India’s ‘exports is twice the world average. I quite hope they can keep it up”.
The Indian government says its exports will grow 20 per cent this year from 122 billion rupees (9.38 billion dollars) in 1986/87 but the official said this figure is based on rupee denominated trade, largely with East European nations and the Soviet Union.
He also said India’s debt service ratio, at about 20 percent, was healthy compared to the 50per cent average in Latin American countries
He said latest World Bank figures show India had an external debt of about 34 billion dollars as at March, 1986.
Article extracted from this publication >> November 27, 1987
