India's Foreign Trade and Real Exchange Rate Behaviour, 1980-1998

The study observes that in the 1980s, India's balance of trade deficit showed a tendency to decline in the face of a more rapid growth of exports than imports. The seven year period under NEP(1991-98), however, did not accelerate the process. Rather there is some indication of its failure on the balance of trade front. Contrary to the claim made in certain pro-NEP circles, exports did not pick up, while imports accelerated. Due to its failure to control domestic inflation vis-a-vis India's trading partners, the real (effective) exchange rate of the rupee appreciated in spite of substantial depreciation of nominal (effective) exchange rate