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

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Back on the Roller-Coaster

Back on the Roller-Coaster

Back on the Roller-Coaster MARKET-LOVERS, it would seem, are apt to suffer impairment of sight no less than those under the spell of more garden varieties of infatuation. How else is the assertion of the authors of the government's annual Economic Survey that "the first signs of the current payments crisis became evident in the second half of 1990-91 when the Gulf war led to a sharp increase in oil prices" to be accounted for? The rise in oil prices and the tapering off of remittances from Indian workers in the Gulf undoubtedly brought matters to a head, but the balance of payments crisis had been in the making, and for all the world to see, long before the Gulf war as, year after year right through the 80s, imports were complacently allowed to exceed exports by huge margins, the difference being paid for through an orgy of loan-raising in the international financial markets leading to the country's external indebtedness rising manifold in the course of the decade. The external account had been thrown so completely off balance that in 1989-90, well before the Gulf developments, the government of India had been reduced to using public sector trading organisations such as the STC and the MMTC to raise the shortest of short- term credits to the tune of several billion dollars from commercial bants abroad to finance imports. The Economic Survey cannot, of course, help admitting these facts, but it simply refuses to see any signs, first or last, of any payments crisis in these developments. According to it, what "imposed a severe strain on the balance of payments position" was that "short-term credits began to dry up"! In other words, if only lenders in the international financial markets could have been persuaded to overlook the government of India's mounting external debt and debt servicing obligations and to continue to put up the cash to pay for the import profligacy unleashed by the so-called economic liberalisation, everything would have been just hunky-dory.

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