some fiscal strains, it is hoped that there will be no directional change. the annual rate of growth in broad money ( m3 ) was 22. 3 per cent in 1994 - 95, but dropped subsequently, pulling down the annual average growth rate between 1994 - 95 and 199697 to 17. 3 per cent and in the current year it should be around 15. 5 per cent. there is a similar pattern in regard to inflation, which averaged 7. 4 per cent between 1994 - 95 and 1996 - 97 and the wholesale price index this year is estimated to be around 6 per cent, less than last year ’ s 6. 9 per cent. finally, non - food credit growth has averaged 21 per cent per annum in the last three years and this year it is expected to be around 20 per cent including investments in psu and corporate bonds, debentures and cp. as you may be aware, the latest cso estimate places gdp growth of 1996 - 97 at 7. 5 per cent and net capital inflow from abroad for the last two years has been placed at 1. 86 and 1. 15 per cent of gdp at market prices. external sector on the external front, in sdr terms, exports have grown at 13. 6 per cent and 16. 7 per cent during 1994 - 95 and 1995 - 96 while imports have grown at 18. 0 and 23. 7 per cent. last year, ( 1996 - 97 ) there has been a deceleration to 9. 6 and 10. 6 per cent, respectively. this year, during april - december, growth of exports was 9. 1 per cent and that of imports 13. 5 per cent, both in sdr terms. the foreign direct investment flows continue to rise and are us $ 2. 5 billion during april - december 1997 - 98 as against $ 2. 7 billion during the whole of 1996 - 97. more important, the policy framework and the procedures ensure that most of the value of fdi flows to infrastructure and productive sectors. fii investments during the current year so far are less compared to $ 1. 9 billion for the entire 1996 - 97 period ; but, it is expected that it would be at least $ 1 billion during this year. the flows on account of external aid last year, commercial borrowings and non - resident deposits are positive on a net basis, and broadly as per expectations at the beginning of the year. the invisibles have also been on track and as a result, the

mr. reddy reports on recent developments and concerns in the emerging market countries and the current scenario in the indian economy key note address by the deputy governor of the reserve bank of india, dr. y. v. reddy, at the cii seminar on ‘ emerging scenario in foreign currency management ’ in mumbai on 20 / 2 / 98. emerging concerns and state of indian economy on this occasion, i propose to address the limited issue of identifying the emerging concerns on the state of economies of emerging markets with particular reference to recent developments and place before you a factual account of the current scenario in the indian economy. the recent crisis the recent crisis has many unique features which are worth relating as a backdrop to the current concerns. first, it was unexpected, by almost all concerned i. e., governments, multilateral institutions, rating agencies and market participants. second, it is unusual since its origin is not of low economic growth or low savings or high government deficit or financial repression but in a way failure of the market mechanisms or private sector. third, it is pervasive since it is a crisis of currencies, corporates stocks and banking. fourth, it is the most contagious so far, with an impact, initially on neighbours, then other developing countries and soon the developed world also. fifth, it is still, by and large inexplicable though the immediate cause appeared to be sudden confidence erosion and global scale herding by market participants. sixth, the response of the official policy makers and the international financial community seems to have been often delayed and pretty much behind events - following or reacting to events rather than shaping them. seventh, it is not only pervasive and widespread but also deep - say the extent of depreciation of some currencies. eighth, while there are some similarities between the directly affected countries, there are significant dissimilarities. ninth, similarly while there are some internal causes ( i. e. domestic situation or excessive short - term borrowing and lending to non productive sectors ) there are also some external causes ( i. e., global factors such as developments in japan and china, including in particular excessive lending from major financial centres ). there are three important aspects of the crisis which we need to note. firstly, it appears to be a case of unrealistically high expectations and disappointment on the part of participants. secondly, there is still some lack of consensus on the appropriate response, and also as to the role of relevant