Rupee rally shrinking India's import bill: Moody's
New Delhi (PTI): The rupee rise of over 10 per cent since the start of the fiscal has put a strong pressure on India's exports, but is helping to contain the import bill, Moody's has said in its latest report.
According to the credit rating agency, the rapid economic growth has led to foreign investors including short-term speculators making hurried entry into the Indian markets. This has resulted in rupee touching its highest exchange valuation in almost a decade in addition to pushing the Sensex to record highs.
Compared with other emerging economies, India is relatively inward-oriented, with exports accounting for only around 15 per cent of its annual gross domestic product as compared with China where exports make up for at least a third of GDP, the report added.
While Indian exports jumped 18.5 per cent during the second and third quarter this year, the import number was far more impressive, registering a surge of 25.5 per cent.
The rating agency also notes that poor infrastructure has been the main hindrance in the development of Indian economy. However, the government's plans to set up Special Economic Zones (SEZ) to boost infrastructure development and manufacturing would aid in increasing production, trade and economic growth, Moody's said.
Meanwhile, the report stated, there have been major farmer protests related to land acquisition for SEZs as agriculture still remains the primary source of income for 60 per cent of the Indian population.
The government has a tough task in convincing the population that a larger and more efficient manufacturing sector would help in boosting growth and also create more job opportunities, Moody's pointed out.
"This is a challenge that the government must win, as few countries have grown at India's current pace without a strong export-oriented manufacturing base," the agency said.
India's foreign trade is projected to remain robust as infrastructure continues to improve and GDP is expected to grow at around 8.5 per cent in 2007-2008, Moody's said.
Delhi
