Q: Write a note on External sector in Indian Economy?
The external sector plays a key role in enabling the conditions to accelerate the pace of external liberalization process. Despite the international uncertainties, Indian external sector is in a strong position and driving the macro-economic strength of the country. Global imbalances and their disruptive impact on currency markets, hardening of interest rates, volatility in crude oil price etc. continue to be some of the major uncertainties and risks faced by the economy. The economic survey of the year 2004-05 had hinted that the Balance of Payments appears to be resilient and strong even after the increase in the imports. The sustained momentum of the manufacturing sector has helped greatly in the growth of exports. The exports of services like software, business and other commercial services has also been playing significant role in adding to the Balance of Payments. The reverses position is also very comfortable due to the increasing capital inflows into the country. The image of India from a land of farmers has changed to that of a technology hub and the country is seen as an international destination for R&D, engineering design, telecommunications, super specialty health care and a manufacturing hub for high technology products. In the area of biotechnology, India has tremendous potential to become a global R&D player with the changed patent laws. The high skilled Indian workforce has also imparted a comparative advantage for the country’s software industry increasing the software service exports, thereby carving a niche for the country IT and IT enable services. Further export growth is possible if it is supported with an increase in the FDI limits in export-orientated sectors. An increase in the FDI would bring it with better technology, human capital formation, exports and increased productivity. The country has witnessed the appreciation in the value of the rupee with...
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