'India now net importer of capital, good for growth'

NEW DELHI: FM P Chidambaram need not lose sleep over India''s mounting trade gap (the excess of merchandise imports over exports) which jumped threefold in the very first month of the current fiscal to $3.854 billion on top of the $26.5-billion gap last fiscal.
Going by RBI, the burgeoning trade gap could, in fact, be a matter to rejoice. The widening trade gap has, for the first time in four years, caused a deficit in the current account transactions of India''s external balance of payments in 2004-05.
The current account turning red from being in black for three years since 2000-01 comes as a huge positive.It marks the end of a period of net capital exports.
"The resurgence of a current account deficit in India''s balance of payments augers well for the growth of the economy," the latest RBI bulletin says. It signals an investment scenario in which net foreign savings can supplement domestic savings to achieve desired rates of investment and growth, RBI says.
In the context of the need to liberalise FDI and FII inflows and to promote services exports, the FM had drawn attention to the trade gap. He had emphasised the need to augment non-trade inflows to bridge the merchandise trade deficit.
RBI sees the trade gap, leading to a current account deficit, as a vehicle for tapping foreign savings to augment domestic investments. It says India has had a trade gap. But during 2001-04, there was net capital export because surpluses in "invisible transactions" financed the trade gap and created current account surpluses.