Oil prices won't trigger BoP crisis: Sinha

By Our Special Correspondent

NEW DELHI, OCT. 16. The Finance Minister, Mr. Yashwant Sinha, today said there would be no problem on the balance of payments front because of the rising international oil prices. He also disagreed with the recent rating of the economy by an international agency, saying it had been proved wrong in the past.

Inaugurating the three-day Economic Editors' Conference here, Mr. Sinha said the foreign exchange reserves had seen some depletion in the recent past, mainly because of the rising international oil prices, but ``there would be no problem on this front.'' The reserves were still at a level of $ 35 billion (including gold and Special Drawing Rights of the IMF) and over $ 32 billion in terms of foreign currency assets.

Despite the pressure on the oil front, the external sector remained fairly manageable because of certain strategies put in place. For instance, the State Bank was launching the India Millennium Bonds; there was a correction in oil prices and the exchange rate management had been such that volatility in the exchange market was reduced drastically. ``So we are not unduly concerned because of the oil prices,'' Mr. Sinha said while his senior officials gave out that the oil import bill was expected to reach $ 17-18 billion against the earlier estimate of $ 12-13 billion. ``We are also hopeful that the current account deficit would be below two per cent of the gross domestic product,'' the Minister said.

Mr. Sinha admitted that the rupee had been under pressure for some time, but the exchange rate management by the Reserve Bank had reduced the volatility in the market. ``The RBI is not targeting any specific rate, but the aim is to contain the volatility.''

On foreign direct investment (FDI), Mr. Sinha said that despite a depression in international investment sentiments because of the East Asian crisis and the recent oil price hikes, the FDI flow till August this year was higher than last year. ``It is not hugely higher, but it is higher than what came in during the same period of last year.''

The Minister referred to the rating of India by the Standard and Poor's (S&P) and pointed out that the international agency had not downgraded the country but changed its outlook, whereas another agency - Moody's - had changed neither its rating nor outlook. ``But things have happened in the past which have proved us right rather than them,'' he added.

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