Indian BoP 1960-704.2.4 Notwithstanding the contracting size of the external sector, as imports growth outstripped exports growth, there was persistent current account deficit (CAD). Emphasis on heavy industrialisation in the second five year Plan led to a sharp increase in imports. On top of this, the strains of Indo-China conflict of 1962, Indo-Pakistan war of 1965 and severe drought of 1965-66 triggered a major BoP crisis. India’s international economic relations with advanced countries came under stress during the Indo-Pak conflict. Withdrawal of foreign aid by countries like the US and conditional resumption of aid by the Aid India Consortium led to contraction in capital inflows. Given the low level of foreign exchange reserves and burgeoning trade deficit, India had no option other than to devalue. Rupee was devalued by 36.5 per cent in June 1966 4.2.5 Though India’s export basket was limited, the sharp devaluation clearly increased the competitiveness of India’s exports. Concurrently, India had to undertake a number of trade liberalising measures. Even though the net impact of devaluation was a contentious issue among the leading economists, data show that exports growth, though modest, outpaced imports growth. In the second half of 1960’s , growth in exports was higher than that in imports. current-affairs/2014-07-18/topics/701
Posted on: Sat, 19 Jul 2014 09:09:48 +0000
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