ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Balance of Payments Jitters

Till the other day the government's public postures about the country's external payments position used to be markedly upbeat. After all, had not exports gone up by 23 per cent in 1987-88, and that too measured in dollar terms, and had not the trade deficit been cut by a tidy Rs 1,008 crore? But now the mood has suddenly changed and the finance minister has this week described the country's balance of payments position as "very difficult". There is even talk, strictly off-the-record as of now, of the country having to approach the IMF for balance of payments support once again. In just the last two weeks of June foreign exchange reserves slumped by Rs 788 crore, bringing the total decline in reserves in the first quarter of the current year to Rs 1,905 crore, from Rs 7,287 crore at the end of March to Rs 5,382 crore three months later. At this level, it has been pointed out, the country's foreign exchange reserves more or less exactly equal the amount of deposits in the foreign currency non-resident (FCNR) accounts with the banks. The vulnerability of the foreign exchange position is underscored by the fact that these deposits in the FCNR accounts are for periods ranging from six months to three years, at interest rates which currently vary between 8.50 per cent per annum and 9.75 per cent per annum.

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