The trade figures for January, and thus those for the seven months of the year so far, show that business is going on as usual, and that any improvement in exports will not necessarily translate into a greater ability to service debt. One of the main components of exports has been IT, which had reached $2.18 billion in the first seven months of the year, which was a 27 percent increase over the same period a year before. Predictions of $15 billion a year in IT exports thus still remain in the future, but now seem doable. However, increased exports will not mean greater ability to service debt unless imports can be reduced. However, in the period under review, imports also grew, Thus the deficit was $13.49 billion, which in turn put pressure on the current account, which posted a deficit in January, thus ending three months of a surplus.
The country should count itself lucky that it has not had to import any food grains recently, but it has a permanent need to import edible oil, fuel oil and pharmaceuticals (especially lifesaving medicines), so debt servicing is an additional burden. It should thus not be a surprise that the current account would remain under pressure. However, despite the many problems the country faces, foreign direct investment reached $1.52 billion in the first seven months of the current fiscal year, which is considerably higher than the $976 million that came in during the same period of the previous year.
All of which may explain the improvement in business confidence reported in the Gallup Survey Business Confidence Index for the third quarter, of 60 percent of businesses expecting their business environment to improve, an improvement of 19 percent over the last quarter. However the survey also found the majority of respondents feeling the country was not moving in the right direction. The improvement has come from political stability, falling inflation and declining interest rates. It seems that the needle is finally shifting, and falling inflation is finally having an effect. But the feeling the country is not moving in the right direction may be because of a realization that the fundamentals have not been changed; that this improvement is only temporary, that nothing has been done to address the debt burden, and there would be another bust soon. The government should not assume that temporary relief, while necessary, is the end of the job. That has only now started.
