Financial Daily from THE HINDU group of publications
Thursday, Feb 23, 2006
Financial Daily from THE HINDU group of publications Thursday, Feb 23, 2006 |
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Exports & Imports Industry & Economy - Economy Money & Banking - RBI & Other Central Banks PM's council wants data on all imports published DGCIS figures at variance with RBI's version Our Bureau
New Delhi , Feb 22 THE Prime Minister's Economic Advisory Council has asked the Government to publish data on all imports, including defence imports,which are essentially exempt from customs duty. The Director-General of Commercial Intelligence and Statistics (DGCIS), which tracks physical imports and exports, does not capture Government imports since no duty is paid on them. In its latest report on `Outlook for the BoP in 2005-06 and 2006-07', which has been submitted to the Prime Minister, Dr Manmohan Singh, the council observed that there was a growing divergence between the trade data as compiled by the DGCIS and the balance of payments (BoP) data reported by the Reserve Bank of India. This, in turn, has resulted in a corresponding divergence in the current account deficit (CAD). According to the report, the CAD for 2005-06 is projected at 2.9 per cent of GDP. "While it is appropriate for an economy of our size with vast investment needs to be running a CAD, its size and composition warrant continuous monitoring. At almost 3 per cent of GDP, the CAD may still be in the comfort zone, provided it goes to finance productive investment," the report said. The council has, however, highlighted that the CAD would amount to only 0.3 per cent of the GDP if it were to be calculated using the DGCIS trade data. On the other hand, the CAD under the RBI data would go up to 2.9 per cent of GDP. During the current year, trade deficit under the DGCIS data is projected at 5.2 per cent of GDP vis-à-vis 7.7 per cent under the BoP data, thereby widening the divergence to 2.5 percentage points of GDP. Asked about the divergence, the Member of the Prime Minister's Economic Advisory Council, Mr Saumitra Chaudhuri, told Business Line, "We don't know. We feel it could be due to one off payments for defence and civilian aircraft imports. We want this data in the public domain so that people can make a proper assessment about the trends in the economy." According to Mr Chaudhuri, if the CAD increases on account of pure economic activity, then there could be a reasonable expectation of the economy heating up, which could mean excess imports and would call for corrective measures by the monetary authorities. But if the CAD shows unusual bulge due to defence imports, then it could be assumed that these were not related to any economic activity and would peter out over a period of time as the imports are paid off. "Hence it may be useful to be as transparent as possible in the published data in the public domain so as to manage expectations on the BoP outlook which is important to inspire the trust and confidence of potential investors, both domestic and foreign," Mr Chaudhuri said, quoting the Council's report. In its report, the Council has also noted that net invisible earnings have increased sharply, rising by $4.4 billion in the first half of 2005-06 to touch $18.7 billion, an increase of 31 per cent compared to the corresponding period of last year.
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