The Survey notes that the sharp fall in growth of world trade in goods from 9.5 per cent in 1997 to 5.3 per cent in 1998 has led to weaker commodity prices, including crude oil.

The balance of payments (BoP) withstood fairly well the turbulence in the international economic and financial markets and remained comfortable during 1997-98 with substantial reserves accumulation for the second year in succession, supported by strong capital flows.

The BoP situation during 1998-99, says the Survey, is manageable, despite the continuing slowdown in exports and a marked deceleration in capital flows. According to the survey, the BoP outlook in the medium term is fraught with a number of risks brought about by the prevailing international environment which could further curtail global output and trade.

The risksinclude substantial equity market corrections in the US and West Europe, affecting investment flows to emerging economies and aggregate demand in these countries, deeper and longer recession in Japan and the lack of international efforts to prevent the South East Asian crisis spreading to Latin America and elsewhere.

During 1998-99, the rupee depreciated against the dollar by about 7.1 per cent from Rs 39.50 per dollar in March 1998 to Rs 42.51 in January 1999. The movements in the exchange rate during the current year helped largely correct for the appreciation of the rupee in real effective exchange rate terms.

The Survey feels strongly that a sustained rapid growth in export remains the most crucial ingredient for ensuring long-term external viability.Vigorous efforts will, therefore, be required to reverse the current deceleration and achieve a rapid growth of exports, especially in the context of the difficult international trading environment.

To achieve the export targets in the light of thedifficult environment "we should also endeavour to reduce various transaction costs emanating from implementation of various rules and regulations pertaining to obtaining licences, customs clearance, refund of duties, infrastructural constraints etc which impinge adversely on the export performance", the survey said.Although progress has already been made to simplify rules, the Survey wants further efforts to be made to smoothen export transactions.

The exchange rate management should continue its focus on smoothening excessive volatility in the exchange rate and maintaining orderly market conditions to ensure that the rate remains consistent with economic fundamentals.

Besides," We need to monitor closely the value of the rupee to ensure that our exports exports continue to be price competitive in the international market". The key priorities for macro-economic policy in the present environment will have to be control of fiscal deficit, careful monetary management, a pragmatic and flexible exchange ratepolicy, continued tight controls on short-term external indebtedness and accelerated reform and strengthening of the financial sector.