Iraq war spurs India's forex reserves

Foreign exchange inflows have grown at the rate of half a billion dollars, reports S Rajagopalan.

The Iraq war may well cast a shadow on India’s economic growth as on that of many other countries, but in one area it seems to have done a lot of good: the country’s foreign exchange kitty.

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According to finance secretary S Narayan, foreign exchange inflows into India have grown at the rate of about half a billion dollars during the last three weeks of the war. The reserves have indeed been growing steadily over a long time and have helped India repay $ 3.5 billion of IMF and World Bank loans well ahead of time.

Narayan, currently here for the IMF-World Bank spring meetings that concluded over the weekend, said India’s macroeconomic fundamentals have never been so strong as at present. Yet, he does not rule out an adverse impact of such imponderables as the persisting global economic slowdown, the Iraq war and the oil crisis in its wake.

Speaking on the Indian economic reforms at the Heritage Foundation, a leading conservative think tank, Narayan emphasised that India achieved a growth of 4.4 per cent during 2002-03 fiscal, despite a crippling drought. He attributed this to the inherent strength of the economy and the vigorous pursuit of the reforms process.

Reform measures are proceeding apace on several fronts. Dealing with Indian stock markets, now reckoned to be highly competitive, Narayan said trading in interest rate futures and derivatives will begin on April 28. The next in line will be currency derivatives.

A privatised contributory pension scheme is likely to be announced next month. To begin with, it will be for new entrants to government service. The scheme will enable employees to make their choice of fund managers for their pension investments.