The Government s efforts to maintain the value of the rupee relative to the dollar in an environment of falling investor confidence and large-scale private outflows cost the Government additional reserves. In real effective terms, the rupee remained roughly stable on average over the course of 2000. Total external public and publicly guaranteed debt was about 51 percent of GDP in 2000. Some reforms have already been implemented, such as the liberalization of the exchange rate in July 2000. Although these measures are expected to boost investor confidence and thus private investment, real GDP growth is forecast to remain sluggish over the next two years.
Manufacturing is likely to exhibit robust growth as cotton manufactures continue to expand.
However, the agriculture sector will probably find it difficult to match its 2000 growth rate, particularly with drought conditions in the early part of the fiscal year and a shortage of irrigation water to sustain expansion. GDP growth is, therefore, projected to remain under 5 percent a year in 2001 2002. Nevertheless, as delayed increases in administered energy prices and the effects of recent rupee depreciation are passed on to consumers, a significant increase in inflation to 6.0 percent is expected in 2001. Under the IMF agreement, the Government is committed to reducing the fiscal deficit to 5.2 percent of GDP in 2001. On the external front, with recent reforms, particularly the rupee depreciation, double-digit export growth is expected in the next two years.