The Telegraph
Since 1st March, 1999
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Silver lining in foreign debt pile

Mumbai, Sept. 30: The Reserve Bank of India (RBI) has today said the economy continues to gain in strength with a substantial improvement in its net international investment position. This is happening at a time when overseas markets are gaining importance in the decision-making processes of the banking and corporate sectors.

The apex bank said India's international investment position in March 2003 showed that international market conditions vis-a-vis domestic market conditions are becoming important determinants of asset liability management-related decisions of the banking and corporate sectors. “This is also a reflection of the increased integration of the Indian economy with the rest of the world,” it added.

According to the RBI, the country’s net foreign liabilities fell to $60.1 billion in March 2003 from $81.1 billion in March 1997. Net foreign liabilities as a per cent of nominal gross domestic product (GDP) has fallen from 23.41 per cent in March 1997 to 12.70 per cent in March 2003. Fresh figures released by RBI show the current account deficit at $1.2 billion in April-June with a trade deficit of $5.9 billion and a net invisible surplus of $4.7 billion. “Thus, the country's net international investment position has improved over 1997-2003,” it said.

A decline in the country’s net foreign liabilities was mainly due to a build-up of foreign exchange assets by RBI during 1997-2003. Loan liabilities of the government sector fell to $42.7 billion.

The increase in the country’s gross foreign assets by $21 billion in 2002-03 was fuelled by a rise in direct investment abroad.

India’s external debt at $109.6 billion in June had increased by $5.0 billion (by 4.8 per cent) from $104.6 billion in March, the RBI said. The increase in external debt during the quarter was mainly on account of increase in non-resident Indians (NRI) deposits ($2.6 billion), external commercial borrowings ($1.1 billion) and short-term trade credit ($0.9 billion).

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