World Economy-No Decline in Protectionism

the fact that the world economic outlook over the medium term still remains unsure. Further, the scramble among the developing countries, many of them facing severe debt servicing problems, to push up exports could adversely affect the terms of trade for these countries, including India. At the same time, some of the factors which have sustained the country's balance of payments in recent years may no longer be at work in future, Thus the scope for further raising output of crude petroleum and therefore for further import substitution in this area is likely to be much smaller than what has been possible in the last few years. Similarly, the strong support that has been available from private remittances and non-resident external accounts (the latter's contribution in 1983-84 was Rs 690 crore) should not be expected to continue On the other hand, repayments to the IMF have to begin in 1985-86 and will reach a peak of SDR 900 million in 1988-89. Amortisation of the commercial borrowings of recent years will be an additional burden. Already by 1986-87 the ratio of debt servicing obligation to exports is expected to go up to around 20 per cent (and to as high as 30 per cent if exports to the rupee payment countries are excluded). The Reserve Bank's Annual Report draws comfort from "'the prudent policy on commercial borrowing" followed by the government so far. But with a rising payments deficit and impending decline in concessional assistance, prudence will have to be abandoned in the face of necessity