Tough Time Ahead for Indian Economy: RBI

Trade Imbalance

Though the merchandise trade balance in Q1 of 2012-13 narrowed, trends in services trade in Q1 of 2012-13 are disconcerting, the RBI report said. Preliminary estimates for Q1 of 2012-13 show services exports at $33.4 billion, contracting 2 percent over the same period a year ago.

Services imports at $20.5 billion, an increase 16 percent. The indication is that the current account deficit (i.e., excess imports over exports) CAD risks are maintained in 2012-13.

Power Sector

In the infrastructure sector lower coal production and supply shortages has emerged as a major bottleneck. As much as 54 GW was created during 11th five year plan and another 60-75 GW may be planned during the 12th five year plan backed in part by Ultra Mega Power Projects (UMPPs). But, a large part of this new capacity is facing coal linkage issues.

RBI said it should be thought over that India with proven coal reserves of 114 billion tonnes has to import about 70 million tonnes of coal. A major investment initiative in India’s mining sector is what required. Reserve Bank hoped that taking steps to attract FDI in mining sector would be helpful in this context.