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Macroeconomic and Monetary Developments in 2005-06
-Announced on the 17th April 2006

The External Economy

During 2005-06, India’s exports continued to maintain the momentum of high growth for the fourth year in succession, registering strong growth of 24.7 per cent on top of 26.4 per cent growth a year ago

Imports of petroleum, oil and lubricants (POL) increased by 46.8 per cent during 2005-06, reflecting the impact of sharp increase in international crude oil prices. Non-oil imports posted a growth of 25.6 per cent during 2005-06 as compared with 33.3 per cent a year ago.

The trade deficit, based on DGCI&S data, increased by 52.7 per cent over the previous year to US $ 39.6 billion during 2005-06.

Balance of payments (BoP) data available for April-December 2005 show that the current account deficit widened in line with the growth in investment demand in the economy. The balance of payments position, nonetheless, remained comfortable during 2005-06 as capital flows continued to remain large.

India’s total external debt declined by US $ 4.0 billion (3.3 per cent) during April-December 2005 to US $ 119.2 billion at end-December 2005, primarily reflecting the redemption of the India Millennium Deposits (IMDs).

India’s foreign exchange reserves were US $ 154.2 billion as on April 7, 2006; at this level, they were US $ 12.8 billion higher over a year ago level, despite an outgo of US $ 7.1 billion on account of redemption of IMDs in December 2005.

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