C P CHANDRASEKHAR^
India's Balance of Payments Under\The New Regime
THROUGH periodic statements by senior officials and confidential and public documents publicised through the press, the World Bank has sought to build a case : unless India hastens the process of economic liberalisation, backed by a more open international trade environment, largej doses of commercial borrowing and enhanced concessional assistance from the industrialised world, one more possible developing country "model" could come a cropper. This case is built on three premises. First, that sustaining a higher rate of growth over the Seventh Plan (S per cent for GNP and 8 per cent for industrial production) would require both, a better utilisation of domestic resources and markets and a major thrust into international markets. Second, that the better utilisation of domestic resources would require a decisive break from a past in which protection, regulation and the public sector were the main elements of India's development strategy to a future where the dismantling of controls and freer imports of capital and technology would help create an efficient, aggressive and internationally competitive industry. And third, that this process of liberalisation would lead in the medium term to a faster expansion in exports that would help finance larger imports, but would have to be aided with an adequate inflow of commercial loans and concessional assistance in the short run.
Going by recent changes in economic policy it is clear that this cause enjoys an adequate number of adherents in positions of power within the country. The new government has in a series of policy moves starting with this year's budget set off that decisive shift in economic policy perspective that the Bank has been arguing for. However, barring periodic references to the specific and non-replicable experiences of South Korea and Taiwan, little evidence has been mustered to argue for the viability of the new strategy. An attempt is made in this note to examine the possible impact of^one aspect of this strategy, viz., the massive liberalisation on the trade front on India's beleagured balance of payments. Besides assessing the implications of recent trends in India's balance of trade, the paper provides some projections that establish the near-impossiblity of ensuring "structural adjustment" of the Bank-IMF kind and argue for greater controls over imports if India is to successfully ride over the crisis that has threatened to overwhelm her balance of payments ever since the second oil shock of 1979-80.
* An economic consultant working in New Delhi.