India's balance of payments position has continued to remain comfortable during 2006-07 so far.

Merchandise exports recorded strong growth, although lower than last year.

Growth in non-oil imports registered a sharp deceleration partly due to a dip in imports of gold and silver. Imports of capital goods increased on the back of investment demand although they also witnessed some deceleration on a high base. Oil imports remained large in view of further hardening of international crude oil prices.

The surplus on the invisibles account remained buoyant during the first quarter of 2006-07, led by exports of software and other business services and private remittances, and financed two-thirds of the trade deficit.

The current account deficit during the first quarter of 2006-07 widened from a year ago, reflecting higher trade deficit.

The higher current account deficit was easily financed by capital flows which have remained large during 2006-07 so far.

India’s foreign exchange reserves were US$ 166.2 billion as on October 20, 2006, showing an increase of US$ 14.5 billion over end-March 2006 level.

Industrial Growth

For the first time in the last 10 years, industrial growth in India has exceeded 10 per cent. Also, for the first time ever, the manufacturing rate of growth has exceeded 12 per cent in six months (April-September 2006). Manufacturing accounts for about 80 per cent of India’s industrial production, while mining and electricity account for approximately 10 per cent each. The mining and quarrying sector has shown a growth of 3.9 per cent.

The electricity sector has registered a double-digit growth of 11.3 per cent during September 2006 as compared to September 2005. Compared with April-September 2005, the two sectors grew by 3.1 per cent and 6.6 per cent respectively, during April-September 2006.

Consumer durables and non-durables have also shown record upward trends. Among the use-base economic sub-groups, intermediate goods have registered an impressive growth of 14.7 per cent during September 2006 over September 2005. Consumer goods have also recorded a high growth of 12.5 per cent with 12.6 per cent growth in consumer durables and 12.5 per cent growth in consumer non-durables.

The National Manufacturing Initiative proposed by the National Manufacturing Competitiveness Council (NMCC) has envisaged stepping up of the manufacturing sector growth from 9 to 10 per cent to 12 to 14 per cent in the 11th Plan period. India is poised to achieve the target of attracting US$ 10 billion of foreign direct investment (FDI) this year as inflows have nearly doubled to US$ 4.4 billion in April-September 2006. Corporate India has recorded its highest rise in salaries at 22 per cent in the first half of 2006-07. The increase was 17 per cent in 2005-06 and between 8.35 per cent and 12.6 per cent in the previous three years.

FIIs

Foreign institutional investors' (FIIs) net investments in equities crossed US$ 7 billion in calendar 2006. FII net investment till 6 November 2006 has been US$ 7.08 billion, according to the Securities and Exchange Board of India (Sebi).

As many as 151 new FIIs have opened their offices in India during first 10 months. In the corresponding period last year, 166 new FIIs entered India. The total number of FIIs that have set shops in India are 974 as on November 7.

FDI

India is poised to achieve the target of attracting $10 billion of foreign direct investment (FDI) this year as inflows have nearly doubled to US$ 4.4 billion in April-September 2006. In September 2006, FDI inflows grew 225 per cent to US$ 916 million as compared to US$ 282 million in the same month last year.

Services attracted maximum investment of US$ 1.5 billion showing growth of 350 per cent the growth. Telecom sector with inflows of US$ 405 million showed the maximum growth of 950 per cent.

Outlook

The buoyancy in manufacturing and services sector activities coupled with the recovery in domestic stock markets and positive investment climate suggest that the recent growth momentum in the Indian economy is likely to be maintained in 2006-07.