BOP crisis
BOP in India has evolved greatly manner which reflects both the changes in the development and the exogenous shocks that it went through from time to time. In the long span from 1951-52 few events have made huge impacts on the BOP of India, one of them being the BOP crisis of India in the year 1991.
Post-independence India had sought a development strategy. India had adopted the inward looking and highly interventionist strategy. Until the 80’s the current account in India was in a surplus and the inflation was low.
During the first half of the 80’s the deficit was very low. It remained below ½ percent of G.D.P of the country. The debt service was kept down by a high proportion of external borrowing. In the later half the current account deficit widened in India. In contrast to the earlier period when India was a supporter of import substitution policy, India had now shifted its development policy to export promotion. Several measures were undertaken for liberalizing the imports for exporters and also promoting exports. The BOP in India was deteriorating because of the oil shocks that occurred during 1980-83 which had led to huge oil imports. The exports weren’t enhanced due to the depressed conditions of the world economy. The reduction in the private transfers led to the decrease in the invisible accounts surplus. The prominent increase in the expenditures led to the disruption of the fiscal position stemming causing the risks for deficits. (Valerie Cerra and Sweta Chaman Saxena)
India in the 80’s suffered through an increasing trade deficit which needed corrective measures as it affected the BOP.
The current account deficit was so huge that other than the usual aids the finances had to be brought by borrowing on ‘concessional terms ‘and by remittances from the non-residents , and due the limited resource base that India had the external debt increased from $35 billion at the end of 1984/85 to 69 billion at the end of 1990/91.The exchange rates were also
Post-independence India had sought a development strategy. India had adopted the inward looking and highly interventionist strategy. Until the 80’s the current account in India was in a surplus and the inflation was low.
During the first half of the 80’s the deficit was very low. It remained below ½ percent of G.D.P of the country. The debt service was kept down by a high proportion of external borrowing. In the later half the current account deficit widened in India. In contrast to the earlier period when India was a supporter of import substitution policy, India had now shifted its development policy to export promotion. Several measures were undertaken for liberalizing the imports for exporters and also promoting exports. The BOP in India was deteriorating because of the oil shocks that occurred during 1980-83 which had led to huge oil imports. The exports weren’t enhanced due to the depressed conditions of the world economy. The reduction in the private transfers led to the decrease in the invisible accounts surplus. The prominent increase in the expenditures led to the disruption of the fiscal position stemming causing the risks for deficits. (Valerie Cerra and Sweta Chaman Saxena)
India in the 80’s suffered through an increasing trade deficit which needed corrective measures as it affected the BOP.
The current account deficit was so huge that other than the usual aids the finances had to be brought by borrowing on ‘concessional terms ‘and by remittances from the non-residents , and due the limited resource base that India had the external debt increased from $35 billion at the end of 1984/85 to 69 billion at the end of 1990/91.The exchange rates were also